Correlation Between Disney and National Vision

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

Diversification Opportunities for Disney and National Vision

-0.25
  Correlation Coefficient

Very good diversification

The 3 months correlation between Disney and National is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and National Vision Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Vision Holdings 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 National Vision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Vision Holdings has no effect on the direction of Disney i.e., Disney and National Vision go up and down completely randomly.

Pair Corralation between Disney and National Vision

Considering the 90-day investment horizon Walt Disney is expected to under-perform the National Vision. But the stock apears to be less risky and, when comparing its historical volatility, Walt Disney is 1.47 times less risky than National Vision. The stock trades about -0.07 of its potential returns per unit of risk. The National Vision Holdings is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  4,790  in National Vision Holdings on September 10, 2022 and sell it today you would lose (951.50)  from holding National Vision Holdings or give up 19.86% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Walt Disney  vs.  National Vision Holdings

 Performance (%) 
       Timeline  
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 sluggish performance in the last few months, the Stock's forward indicators remain relatively invariable which may send shares a bit higher in January 2023. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Disney Price Channel

National Vision Holdings 
National Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in National Vision Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, National Vision may actually be approaching a critical reversion point that can send shares even higher in January 2023.

National Price Channel

Disney and National Vision Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Disney and National Vision

The main advantage of trading using opposite Disney and National Vision positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney position performs unexpectedly, National Vision 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 National Vision will offset losses from the drop in National Vision's long position.
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The idea behind Walt Disney and National Vision Holdings 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 Probability Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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