Correlation Between Disney and AMC Entertainment

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

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

Diversification Opportunities for Disney and AMC Entertainment

-0.31

Correlation Coefficient

Disney  AMC Entertainment

Very good diversification

The 3 months correlation between Disney and AMC is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and AMC Entertainment Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMC Entertainment and 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 Walt Disney are associated (or correlated) with AMC Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMC Entertainment has no effect on the direction of Disney i.e., Disney and AMC Entertainment go up and down completely randomly.

Pair Corralation between Disney and AMC Entertainment

Considering the 90-day investment horizon Walt Disney is expected to under-perform the AMC Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, Walt Disney is 4.73 times less risky than AMC Entertainment. The stock trades about -0.35 of its potential returns per unit of risk. The AMC Entertainment Holdings is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  314.00  in AMC Entertainment Holdings on February 1, 2024 and sell it today you would lose (21.00) from holding AMC Entertainment Holdings or give up 6.69% of portfolio value over 90 days.

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

Walt Disney  vs.  AMC Entertainment Holdings

Walt Disney

Risk-Adjusted Performance

9 of 100

Good

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 unfluctuating forward indicators, Disney unveiled solid returns over the last few months and may actually be approaching a breakup point.

AMC Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AMC Entertainment Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Disney and AMC Entertainment

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

The idea behind Walt Disney and AMC Entertainment Holdings 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.