Correlation Between Disney and American Beacon

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

Diversification Opportunities for Disney and American Beacon

0.89
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Disney and American is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and American Beacon Mid-Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Mid-Cap 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 American Beacon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Beacon Mid-Cap has no effect on the direction of Disney i.e., Disney and American Beacon go up and down completely randomly.

Pair Corralation between Disney and American Beacon

Considering the 90-day investment horizon Walt Disney is expected to under-perform the American Beacon. In addition to that, Disney is 1.1 times more volatile than American Beacon Mid-Cap. It trades about -0.37 of its total potential returns per unit of risk. American Beacon Mid-Cap is currently generating about -0.33 per unit of volatility. If you would invest  1,732  in American Beacon Mid-Cap on June 27, 2022 and sell it today you would lose (174.00)  from holding American Beacon Mid-Cap or give up 10.05% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy95.45%
ValuesDaily Returns

Walt Disney  vs.  American Beacon Mid-Cap

 Performance (%) 
       Timeline  
Walt Disney 
Disney Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward indicators, Disney is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Disney Price Channel

American Beacon Mid-Cap 
American Performance
0 of 100
Over the last 90 days American Beacon Mid-Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, American Beacon is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

American Price Channel

Disney and American Beacon Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Disney and American Beacon

The main advantage of trading using opposite Disney and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney position performs unexpectedly, American Beacon 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 American Beacon will offset losses from the drop in American Beacon's long position.
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The idea behind Walt Disney and American Beacon Mid-Cap 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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