Correlation Between Disney and Seafarer Exploration

Can any of the company-specific risk be diversified away by investing in both Disney and Seafarer Exploration at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Disney and Seafarer Exploration into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Walt Disney and Seafarer Exploration, you can compare the effects of market volatilities on Disney and Seafarer Exploration and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Disney with a short position of Seafarer Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and Seafarer Exploration.

Diversification Opportunities for Disney and Seafarer Exploration

-0.36

Correlation Coefficient

Disney  Seafarer Exploration

Very good diversification

The 3 months correlation between Disney and Seafarer is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Seafarer Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seafarer Exploration and Disney is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Walt Disney are associated (or correlated) with Seafarer Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seafarer Exploration has no effect on the direction of Disney i.e., Disney and Seafarer Exploration go up and down completely randomly.

Pair Corralation between Disney and Seafarer Exploration

Considering the 90-day investment horizon Walt Disney is expected to under-perform the Seafarer Exploration. But the stock apears to be less risky and, when comparing its historical volatility, Walt Disney is 5.19 times less risky than Seafarer Exploration. The stock trades about -0.02 of its potential returns per unit of risk. The Seafarer Exploration is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  0.40  in Seafarer Exploration on October 26, 2024 and sell it today you would earn a total of  0.06  from holding Seafarer Exploration or generate 15.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Walt Disney  vs.  Seafarer Exploration

Walt Disney

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, Disney unveiled solid returns over the last few months and may actually be approaching a breakup point.

Seafarer Exploration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seafarer Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Disney and Seafarer Exploration

The main advantage of trading using opposite Disney and Seafarer Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney position performs unexpectedly, Seafarer Exploration can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Seafarer Exploration will offset losses from the drop in Seafarer Exploration's long position.

The idea behind Walt Disney and Seafarer Exploration pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..