Correlation Between Disney and Virgin

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

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

Diversification Opportunities for Disney and Virgin

0.19

Correlation Coefficient

Disney  Virgin

Average diversification

The 3 months correlation between Disney and Virgin is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Virgin Media Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virgin Media Communi 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 Virgin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virgin Media Communi has no effect on the direction of Disney i.e., Disney and Virgin go up and down completely randomly.

Pair Corralation between Disney and Virgin

Considering the 90-day investment horizon Walt Disney is expected to under-perform the Virgin. In addition to that, Disney is 2.61 times more volatile than Virgin Media Communications. It trades about -0.13 of its total potential returns per unit of risk. Virgin Media Communications is currently generating about 0.02 per unit of volatility. If you would invest  8,558  in Virgin Media Communications on December 30, 2024 and sell it today you would earn a total of  42.00  from holding Virgin Media Communications or generate 0.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Walt Disney  vs.  Virgin Media Communications

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.

Virgin Media Communi

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Virgin Media Communications are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Virgin 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 Virgin

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

The idea behind Walt Disney and Virgin Media Communications 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.