Correlation Between Disney and AMERICAN

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

By analyzing existing cross correlation between Walt Disney and AMERICAN EXPRESS 405, you can compare the effects of market volatilities on Disney and AMERICAN 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 AMERICAN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and AMERICAN.

Diversification Opportunities for Disney and AMERICAN

0.0

Correlation Coefficient

Disney  AMERICAN

Pay attention - limited upside

The 3 months correlation between Disney and AMERICAN is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and AMERICAN EXPRESS 405 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMERICAN EXPRESS 405 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 AMERICAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMERICAN EXPRESS 405 has no effect on the direction of Disney i.e., Disney and AMERICAN go up and down completely randomly.

Pair Corralation between Disney and AMERICAN

If you would invest  0.00  in AMERICAN EXPRESS 405 on December 29, 2024 and sell it today you would earn a total of  0.00  from holding AMERICAN EXPRESS 405 or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.64%
Values	Daily Returns

Walt Disney  vs.  AMERICAN EXPRESS 405

Walt Disney

Risk-Adjusted Performance

Very Weak

Over the last 90 days Walt Disney has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's forward indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

AMERICAN EXPRESS 405

Risk-Adjusted Performance

Very Weak

Over the last 90 days AMERICAN EXPRESS 405 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, AMERICAN is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Disney and AMERICAN

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

The idea behind Walt Disney and AMERICAN EXPRESS 405 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.