Correlation Between Walt Disney and Marsh McLennan
Can any of the company-specific risk be diversified away by investing in both Walt Disney and Marsh McLennan 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 Walt Disney and Marsh McLennan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Walt Disney and Marsh McLennan Companies, you can compare the effects of market volatilities on Walt Disney and Marsh McLennan 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 Walt Disney with a short position of Marsh McLennan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walt Disney and Marsh McLennan.
Diversification Opportunities for Walt Disney and Marsh McLennan
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Walt and Marsh is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding The Walt Disney and Marsh McLennan Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marsh McLennan Companies and Walt 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 The Walt Disney are associated (or correlated) with Marsh McLennan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marsh McLennan Companies has no effect on the direction of Walt Disney i.e., Walt Disney and Marsh McLennan go up and down completely randomly.
Pair Corralation between Walt Disney and Marsh McLennan
Assuming the 90 days trading horizon The Walt Disney is expected to generate 1.47 times more return on investment than Marsh McLennan. However, Walt Disney is 1.47 times more volatile than Marsh McLennan Companies. It trades about 0.08 of its potential returns per unit of risk. Marsh McLennan Companies is currently generating about 0.04 per unit of risk. If you would invest 9,113 in The Walt Disney on September 27, 2024 and sell it today you would earn a total of 1,543 from holding The Walt Disney or generate 16.93% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
The Walt Disney vs. Marsh McLennan Companies
Performance |
Timeline |
Walt Disney |
Marsh McLennan Companies |
Walt Disney and Marsh McLennan Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Walt Disney and Marsh McLennan
The main advantage of trading using opposite Walt Disney and Marsh McLennan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walt Disney position performs unexpectedly, Marsh McLennan 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 Marsh McLennan will offset losses from the drop in Marsh McLennan's long position.Walt Disney vs. NXP Semiconductors NV | Walt Disney vs. Haverty Furniture Companies | Walt Disney vs. Taiwan Semiconductor Manufacturing | Walt Disney vs. Tower Semiconductor |
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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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