Correlation Between AUTONATION and Disney

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

By analyzing existing cross correlation between AUTONATION INC 38 and Walt Disney, you can compare the effects of market volatilities on AUTONATION 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 AUTONATION with a short position of Disney. Check out your portfolio center. Please also check ongoing floating volatility patterns of AUTONATION and Disney.

Diversification Opportunities for AUTONATION and Disney

-0.05

Correlation Coefficient

AUTONATION  Disney

Good diversification

The 3 months correlation between AUTONATION and Disney is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding AUTONATION INC 38 and Walt Disney in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walt Disney and AUTONATION 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 AUTONATION INC 38 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 AUTONATION i.e., AUTONATION and Disney go up and down completely randomly.

Pair Corralation between AUTONATION and Disney

Assuming the 90 days trading horizon AUTONATION is expected to generate 9.27 times less return on investment than Disney. But when comparing it to its historical volatility, AUTONATION INC 38 is 1.88 times less risky than Disney. It trades about 0.0 of its potential returns per unit of risk. Walt Disney is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  10,806  in Walt Disney on October 23, 2024 and sell it today you would earn a total of  44.00  from holding Walt Disney or generate 0.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	88.48%
Values	Daily Returns

AUTONATION INC 38  vs.  Walt Disney

AUTONATION INC 38

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AUTONATION INC 38 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, AUTONATION is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with AUTONATION and Disney

The main advantage of trading using opposite AUTONATION and Disney positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AUTONATION 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 AUTONATION INC 38 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 Transaction History module to view history of all your transactions and understand their impact on performance.