Correlation Between Disney and Cardlytics

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

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

Diversification Opportunities for Disney and Cardlytics

0.62

Correlation Coefficient

Disney  Cardlytics

Poor diversification

The 3 months correlation between Disney and Cardlytics is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Cardlytics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardlytics 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 Cardlytics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cardlytics has no effect on the direction of Disney i.e., Disney and Cardlytics go up and down completely randomly.

Pair Corralation between Disney and Cardlytics

Considering the 90-day investment horizon Disney is expected to generate 21.84 times less return on investment than Cardlytics. But when comparing it to its historical volatility, Walt Disney is 4.8 times less risky than Cardlytics. It trades about 0.0 of its potential returns per unit of risk. Cardlytics is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,844  in Cardlytics on February 23, 2024 and sell it today you would lose (1,966) from holding Cardlytics or give up 69.13% of portfolio value over 90 days.

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

Walt Disney  vs.  Cardlytics

Walt Disney

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Walt Disney has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, Disney is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Cardlytics

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cardlytics are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain essential indicators, Cardlytics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Disney and Cardlytics

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

The idea behind Walt Disney and Cardlytics 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.