Correlation Between Disney and TRAVELERS

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

By analyzing existing cross correlation between Walt Disney and TRAVELERS INC 46, you can compare the effects of market volatilities on Disney and TRAVELERS 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 TRAVELERS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and TRAVELERS.

Diversification Opportunities for Disney and TRAVELERS

-0.7

Correlation Coefficient

Disney  TRAVELERS

Excellent diversification

The 3 months correlation between Disney and TRAVELERS is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and TRAVELERS INC 46 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRAVELERS INC 46 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 TRAVELERS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRAVELERS INC 46 has no effect on the direction of Disney i.e., Disney and TRAVELERS go up and down completely randomly.

Pair Corralation between Disney and TRAVELERS

Considering the 90-day investment horizon Walt Disney is expected to generate 0.78 times more return on investment than TRAVELERS. However, Walt Disney is 1.29 times less risky than TRAVELERS. It trades about 0.13 of its potential returns per unit of risk. TRAVELERS INC 46 is currently generating about -0.03 per unit of risk. If you would invest  9,631  in Walt Disney on October 22, 2024 and sell it today you would earn a total of  1,071  from holding Walt Disney or generate 11.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	74.19%
Values	Daily Returns

Walt Disney  vs.  TRAVELERS INC 46

Walt Disney

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, Disney may actually be approaching a critical reversion point that can send shares even higher in February 2025.

TRAVELERS INC 46

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TRAVELERS INC 46 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, TRAVELERS 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 TRAVELERS

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

The idea behind Walt Disney and TRAVELERS INC 46 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.