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

Walt Disney  Marsh McLennan

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 0.88 times more return on investment than Marsh McLennan. However, The Walt Disney is 1.13 times less risky than Marsh McLennan. It trades about -0.18 of its potential returns per unit of risk. Marsh McLennan Companies is currently generating about -0.4 per unit of risk. If you would invest  11,003  in The Walt Disney on September 28, 2024 and sell it today you would lose (347.00) from holding The Walt Disney or give up 3.15% of portfolio value 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

Walt Disney

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Walt Disney are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Walt Disney unveiled solid returns over the last few months and may actually be approaching a breakup point.

Marsh McLennan Companies

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Marsh McLennan Companies are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Marsh McLennan is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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.

The idea behind The Walt Disney and Marsh McLennan Companies 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.