Correlation Between Disney and Fundamental Investors

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Can any of the company-specific risk be diversified away by investing in both Disney and Fundamental Investors 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 Fundamental Investors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walt Disney and Fundamental Investors Class, you can compare the effects of market volatilities on Disney and Fundamental Investors 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 Fundamental Investors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and Fundamental Investors.

Diversification Opportunities for Disney and Fundamental Investors

  Correlation Coefficient

Weak diversification

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

Pair Corralation between Disney and Fundamental Investors

Considering the 90-day investment horizon Walt Disney is expected to under-perform the Fundamental Investors. In addition to that, Disney is 1.68 times more volatile than Fundamental Investors Class. It trades about -0.06 of its total potential returns per unit of risk. Fundamental Investors Class is currently generating about 0.01 per unit of volatility. If you would invest  6,141  in Fundamental Investors Class on September 1, 2022 and sell it today you would earn a total of  101.00  from holding Fundamental Investors Class or generate 1.64% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
ValuesDaily Returns

Walt Disney  vs.  Fundamental Investors Class

 Performance (%) 
Walt Disney 
Disney Performance
0 of 100
Over the last 90 days Walt Disney has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's forward indicators remain relatively invariable which may send shares a bit higher in December 2022. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Disney Price Channel

Fundamental Investors 
Fundamental Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Fundamental Investors Class are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Fundamental Investors is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fundamental Price Channel

Disney and Fundamental Investors Volatility Contrast

   Predicted Return Density   

Pair Trading with Disney and Fundamental Investors

The main advantage of trading using opposite Disney and Fundamental Investors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney position performs unexpectedly, Fundamental Investors 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 Fundamental Investors will offset losses from the drop in Fundamental Investors' long position.
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The idea behind Walt Disney and Fundamental Investors Class 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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Check out your portfolio center. 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 Analyst Recommendations module to analyst recommendations and target price estimates broken down by several categories.

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