Correlation Between Dolby Laboratories and Disney

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

Diversification Opportunities for Dolby Laboratories and Disney

0.67
  Correlation Coefficient

Poor diversification

The 3 months correlation between Dolby and Disney is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Dolby Laboratories and Walt Disney in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walt Disney and Dolby Laboratories 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 Dolby Laboratories 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 Dolby Laboratories i.e., Dolby Laboratories and Disney go up and down completely randomly.

Pair Corralation between Dolby Laboratories and Disney

Considering the 90-day investment horizon Dolby Laboratories is expected to generate 0.79 times more return on investment than Disney. However, Dolby Laboratories is 1.26 times less risky than Disney. It trades about 0.0 of its potential returns per unit of risk. Walt Disney is currently generating about -0.02 per unit of risk. If you would invest  6,893  in Dolby Laboratories on July 4, 2022 and sell it today you would lose (378.00)  from holding Dolby Laboratories or give up 5.48% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Dolby Laboratories  vs.  Walt Disney

 Performance (%) 
       Timeline  
Dolby Laboratories 
Dolby Performance
0 of 100
Over the last 90 days Dolby Laboratories has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Dolby 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 relatively invariable forward indicators, Disney is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Disney Price Channel

Dolby Laboratories and Disney Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Dolby Laboratories and Disney

The main advantage of trading using opposite Dolby Laboratories and Disney positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dolby Laboratories 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 Dolby Laboratories 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

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