Correlation Between Disney and Fox Corp

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

Diversification Opportunities for Disney and Fox Corp

0.76
  Correlation Coefficient

Poor diversification

The 3 months correlation between Disney and Fox Corp is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Fox Corp Cl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fox Corp Cl 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 Fox Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fox Corp Cl has no effect on the direction of Disney i.e., Disney and Fox Corp go up and down completely randomly.

Pair Corralation between Disney and Fox Corp

Considering the 90-day investment horizon Walt Disney is expected to under-perform the Fox Corp. But the stock apears to be less risky and, when comparing its historical volatility, Walt Disney is 1.02 times less risky than Fox Corp. The stock trades about -0.26 of its potential returns per unit of risk. The Fox Corp Cl is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  3,055  in Fox Corp Cl on July 6, 2022 and sell it today you would lose (57.00)  from holding Fox Corp Cl or give up 1.87% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Walt Disney  vs.  Fox Corp Cl

 Performance (%) 
       Timeline  
Walt Disney 
Disney Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal forward indicators, Disney may actually be approaching a critical reversion point that can send shares even higher in November 2022.

Disney Price Channel

Fox Corp Cl 
Fox Corp Performance
0 of 100
Over the last 90 days Fox Corp Cl has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Fox Corp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Fox Corp Price Channel

Disney and Fox Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Disney and Fox Corp

The main advantage of trading using opposite Disney and Fox Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney position performs unexpectedly, Fox Corp 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 Fox Corp will offset losses from the drop in Fox Corp's long position.
Disney vs. Live Nation Entertainment
The idea behind Walt Disney and Fox Corp Cl 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.
Fox Corp vs. Live Nation Entertainment
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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