Correlation Between Disney and BECTON

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

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

Diversification Opportunities for Disney and BECTON

-0.75

Correlation Coefficient

Disney  BECTON

Pay attention - limited upside

The 3 months correlation between Disney and BECTON is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and BECTON DICKINSON AND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BECTON DICKINSON AND 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 BECTON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BECTON DICKINSON AND has no effect on the direction of Disney i.e., Disney and BECTON go up and down completely randomly.

Pair Corralation between Disney and BECTON

Considering the 90-day investment horizon Walt Disney is expected to generate 2.78 times more return on investment than BECTON. However, Disney is 2.78 times more volatile than BECTON DICKINSON AND. It trades about 0.31 of its potential returns per unit of risk. BECTON DICKINSON AND is currently generating about -0.14 per unit of risk. If you would invest  8,925  in Walt Disney on September 4, 2024 and sell it today you would earn a total of  2,791  from holding Walt Disney or generate 31.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.88%
Values	Daily Returns

Walt Disney  vs.  BECTON DICKINSON AND

Walt Disney

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 24 (%) 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.

BECTON DICKINSON AND

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Disney and BECTON

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

The idea behind Walt Disney and BECTON DICKINSON AND 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.