Correlation Between Disney and Xsabx

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

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

Diversification Opportunities for Disney and Xsabx

0.85

Correlation Coefficient

Disney  Xsabx

Very poor diversification

The 3 months correlation between Disney and Xsabx is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Xsabx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xsabx 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 Xsabx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xsabx has no effect on the direction of Disney i.e., Disney and Xsabx go up and down completely randomly.

Pair Corralation between Disney and Xsabx

Considering the 90-day investment horizon Disney is expected to generate 5.67 times less return on investment than Xsabx. But when comparing it to its historical volatility, Walt Disney is 3.82 times less risky than Xsabx. It trades about 0.05 of its potential returns per unit of risk. Xsabx is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  438.00  in Xsabx on September 21, 2024 and sell it today you would earn a total of  580.00  from holding Xsabx or generate 132.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Walt Disney  vs.  Xsabx

Walt Disney

Risk-Adjusted Performance

16 of 100

Good

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.

Xsabx

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xsabx are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental drivers, Xsabx may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Disney and Xsabx

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

The idea behind Walt Disney and Xsabx 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.