Correlation Between Disney and PRUDENTIAL

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

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

Diversification Opportunities for Disney and PRUDENTIAL

-0.52

Correlation Coefficient

Disney  PRUDENTIAL

Excellent diversification

The 3 months correlation between Disney and PRUDENTIAL is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and PRUDENTIAL FINANCIAL INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PRUDENTIAL FINANCIAL INC 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 PRUDENTIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PRUDENTIAL FINANCIAL INC has no effect on the direction of Disney i.e., Disney and PRUDENTIAL go up and down completely randomly.

Pair Corralation between Disney and PRUDENTIAL

Considering the 90-day investment horizon Walt Disney is expected to under-perform the PRUDENTIAL. But the stock apears to be less risky and, when comparing its historical volatility, Walt Disney is 7.53 times less risky than PRUDENTIAL. The stock trades about -0.21 of its potential returns per unit of risk. The PRUDENTIAL FINANCIAL INC is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  7,624  in PRUDENTIAL FINANCIAL INC on October 9, 2024 and sell it today you would earn a total of  932.00  from holding PRUDENTIAL FINANCIAL INC or generate 12.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	84.21%
Values	Daily Returns

Walt Disney  vs.  PRUDENTIAL FINANCIAL INC

Walt Disney

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 16 (%) 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.

PRUDENTIAL FINANCIAL INC

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PRUDENTIAL FINANCIAL INC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, PRUDENTIAL sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Disney and PRUDENTIAL

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

The idea behind Walt Disney and PRUDENTIAL FINANCIAL INC 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.