Correlation Between FibraHotel and Disney

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

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

Diversification Opportunities for FibraHotel and Disney

0.59

Correlation Coefficient

FibraHotel  Disney

Very weak diversification

The 3 months correlation between FibraHotel and Disney is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding FibraHotel and The Walt Disney in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walt Disney and FibraHotel 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 FibraHotel are associated (or correlated) with Disney. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walt Disney has no effect on the direction of FibraHotel i.e., FibraHotel and Disney go up and down completely randomly.

Pair Corralation between FibraHotel and Disney

Assuming the 90 days trading horizon FibraHotel is expected to generate 1.12 times less return on investment than Disney. In addition to that, FibraHotel is 1.72 times more volatile than The Walt Disney. It trades about 0.04 of its total potential returns per unit of risk. The Walt Disney is currently generating about 0.07 per unit of volatility. If you would invest  188,100  in The Walt Disney on September 27, 2024 and sell it today you would earn a total of  38,900  from holding The Walt Disney or generate 20.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.4%
Values	Daily Returns

FibraHotel  vs.  The Walt Disney

FibraHotel

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FibraHotel are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical indicators, FibraHotel sustained solid returns over the last few months and may actually be approaching a breakup point.

Walt Disney

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Walt Disney are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Disney showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FibraHotel and Disney

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

The idea behind FibraHotel and The Walt Disney 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.

Check out your portfolio center.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.