Correlation Between Rithm Capital and Disney

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

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

Diversification Opportunities for Rithm Capital and Disney

0.67

Correlation Coefficient

Rithm Capital  Disney

Poor diversification

The 3 months correlation between Rithm and Disney is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Rithm Capital Corp and Walt Disney in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walt Disney and Rithm Capital 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 Rithm Capital Corp 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 Rithm Capital i.e., Rithm Capital and Disney go up and down completely randomly.

Pair Corralation between Rithm Capital and Disney

Assuming the 90 days trading horizon Rithm Capital is expected to generate 4.44 times less return on investment than Disney. But when comparing it to its historical volatility, Rithm Capital Corp is 3.95 times less risky than Disney. It trades about 0.16 of its potential returns per unit of risk. Walt Disney is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  9,578  in Walt Disney on October 26, 2024 and sell it today you would earn a total of  1,526  from holding Walt Disney or generate 15.93% return on investment over 90 days.

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

Rithm Capital Corp  vs.  Walt Disney

Rithm Capital Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rithm Capital Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Rithm Capital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Walt Disney

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 14 (%) 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.

Pair Trading with Rithm Capital and Disney

The main advantage of trading using opposite Rithm Capital and Disney positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rithm Capital 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 Rithm Capital Corp and 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.

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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.