Correlation Between Target and Disney

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

Diversification Opportunities for Target and Disney

0.38
  Correlation Coefficient

Weak diversification

The 3 months correlation between Target and Disney is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Target and Walt Disney in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walt Disney and Target 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 Target are associated (or correlated) with Disney. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walt Disney has no effect on the direction of Target i.e., Target and Disney go up and down completely randomly.

Pair Corralation between Target and Disney

Considering the 90-day investment horizon Target is expected to generate 1.06 times more return on investment than Disney. However, Target is 1.06 times more volatile than Walt Disney. It trades about 0.02 of its potential returns per unit of risk. Walt Disney is currently generating about -0.06 per unit of risk. If you would invest  16,251  in Target on September 2, 2022 and sell it today you would earn a total of  102.00  from holding Target or generate 0.63% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Target  vs.  Walt Disney

 Performance (%) 
       Timeline  
Target 
Target Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Target are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Target is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Target Price Channel

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 latest sluggish performance, the Stock's forward indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Disney Price Channel

Target and Disney Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Target and Disney

The main advantage of trading using opposite Target and Disney positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Target position performs unexpectedly, Disney 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 Disney will offset losses from the drop in Disney's long position.
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The idea behind Target and Walt Disney 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.

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