Correlation Between Disney and Pollard Banknote

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

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

Diversification Opportunities for Disney and Pollard Banknote

-0.6

Correlation Coefficient

Disney  Pollard Banknote

Excellent diversification

The 3 months correlation between Disney and Pollard is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Pollard Banknote Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pollard Banknote 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 Pollard Banknote. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pollard Banknote has no effect on the direction of Disney i.e., Disney and Pollard Banknote go up and down completely randomly.

Pair Corralation between Disney and Pollard Banknote

Considering the 90-day investment horizon Walt Disney is expected to under-perform the Pollard Banknote. But the stock apears to be less risky and, when comparing its historical volatility, Walt Disney is 1.14 times less risky than Pollard Banknote. The stock trades about -0.08 of its potential returns per unit of risk. The Pollard Banknote Limited is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,700  in Pollard Banknote Limited on September 16, 2024 and sell it today you would earn a total of  41.00  from holding Pollard Banknote Limited or generate 2.41% return on investment over 90 days.

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

Walt Disney  vs.  Pollard Banknote Limited

Walt Disney

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting forward indicators, Disney unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pollard Banknote

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pollard Banknote Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Pollard Banknote is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Disney and Pollard Banknote

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

The idea behind Walt Disney and Pollard Banknote Limited 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.