Correlation Between Disney and SolGold Plc

Can any of the company-specific risk be diversified away by investing in both Disney and SolGold Plc 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 SolGold Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Walt Disney and SolGold Plc, you can compare the effects of market volatilities on Disney and SolGold Plc 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 SolGold Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and SolGold Plc.

Diversification Opportunities for Disney and SolGold Plc

-0.85

Correlation Coefficient

Disney  SolGold Plc

Pay attention - limited upside

The 3 months correlation between Disney and SolGold is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and SolGold Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SolGold Plc 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 SolGold Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SolGold Plc has no effect on the direction of Disney i.e., Disney and SolGold Plc go up and down completely randomly.

Pair Corralation between Disney and SolGold Plc

Considering the 90-day investment horizon Walt Disney is expected to generate 0.1 times more return on investment than SolGold Plc. However, Walt Disney is 10.48 times less risky than SolGold Plc. It trades about -0.26 of its potential returns per unit of risk. SolGold Plc is currently generating about -0.09 per unit of risk. If you would invest  11,410  in Walt Disney on October 12, 2024 and sell it today you would lose (434.00) from holding Walt Disney or give up 3.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Walt Disney  vs.  SolGold Plc

Walt Disney

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting forward indicators, Disney unveiled solid returns over the last few months and may actually be approaching a breakup point.

SolGold Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SolGold Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Disney and SolGold Plc

The main advantage of trading using opposite Disney and SolGold Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney position performs unexpectedly, SolGold Plc 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 SolGold Plc will offset losses from the drop in SolGold Plc's long position.

The idea behind Walt Disney and SolGold Plc 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.