Correlation Between Disney and SSIC Old

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

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

Diversification Opportunities for Disney and SSIC Old

0.88

Correlation Coefficient

Disney  SSIC Old

Very poor diversification

The 3 months correlation between Disney and SSIC is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and SSIC Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSIC Old 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 SSIC Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSIC Old has no effect on the direction of Disney i.e., Disney and SSIC Old go up and down completely randomly.

Pair Corralation between Disney and SSIC Old

Considering the 90-day investment horizon Disney is expected to generate 3.21 times less return on investment than SSIC Old. But when comparing it to its historical volatility, Walt Disney is 1.2 times less risky than SSIC Old. It trades about 0.02 of its potential returns per unit of risk. SSIC Old is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  773.00  in SSIC Old on October 10, 2024 and sell it today you would earn a total of  510.00  from holding SSIC Old or generate 65.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.36%
Values	Daily Returns

Walt Disney  vs.  SSIC Old

Walt Disney

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 17 (%) 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.

SSIC Old

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SSIC Old has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, SSIC Old is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Disney and SSIC Old

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

The idea behind Walt Disney and SSIC Old 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.