Correlation Between Amada and Disney

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

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

Diversification Opportunities for Amada and Disney

0.78

Correlation Coefficient

Amada  Disney

Poor diversification

The 3 months correlation between Amada and Disney is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Amada Co and Walt Disney in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walt Disney and Amada 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 Amada Co 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 Amada i.e., Amada and Disney go up and down completely randomly.

Pair Corralation between Amada and Disney

If you would invest  4,454  in Amada Co on February 6, 2024 and sell it today you would earn a total of  0.00  from holding Amada Co or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Amada Co  vs.  Walt Disney

Amada

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amada Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain essential indicators, Amada may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Walt Disney

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward indicators, Disney unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amada and Disney

The main advantage of trading using opposite Amada and Disney positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amada 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 Amada Co 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.