Correlation Between Disney and Lightinthebox Holding

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

Diversification Opportunities for Disney and Lightinthebox Holding

-0.59
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Disney and Lightinthebox is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Lightinthebox Holding Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lightinthebox Holding 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 Lightinthebox Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lightinthebox Holding has no effect on the direction of Disney i.e., Disney and Lightinthebox Holding go up and down completely randomly.

Pair Corralation between Disney and Lightinthebox Holding

Considering the 90-day investment horizon Walt Disney is expected to under-perform the Lightinthebox Holding. But the stock apears to be less risky and, when comparing its historical volatility, Walt Disney is 2.27 times less risky than Lightinthebox Holding. The stock trades about -0.22 of its potential returns per unit of risk. The Lightinthebox Holding Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  98.00  in Lightinthebox Holding Co on July 9, 2022 and sell it today you would earn a total of  1.00  from holding Lightinthebox Holding Co or generate 1.02% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy95.65%
ValuesDaily Returns

Walt Disney  vs.  Lightinthebox Holding Co

 Performance (%) 
       Timeline  
Walt Disney 
Disney Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 4 (%) 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

Lightinthebox Holding 
Lightinthebox Performance
0 of 100
Over the last 90 days Lightinthebox Holding Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Lightinthebox Price Channel

Disney and Lightinthebox Holding Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Disney and Lightinthebox Holding

The main advantage of trading using opposite Disney and Lightinthebox Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney position performs unexpectedly, Lightinthebox Holding 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 Lightinthebox Holding will offset losses from the drop in Lightinthebox Holding's long position.
Disney vs. Live Nation Entertainment
The idea behind Walt Disney and Lightinthebox Holding Co 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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