Correlation Between Disney and CommScope Holding

Can any of the company-specific risk be diversified away by investing in both Disney and CommScope 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 CommScope 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 CommScope Holding Co, you can compare the effects of market volatilities on Disney and CommScope 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 CommScope Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and CommScope Holding.

Diversification Opportunities for Disney and CommScope Holding

-0.82

Correlation Coefficient

Disney  CommScope Holding

Pay attention - limited upside

The 3 months correlation between Disney and CommScope is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and CommScope Holding Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CommScope 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 CommScope Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CommScope Holding has no effect on the direction of Disney i.e., Disney and CommScope Holding go up and down completely randomly.

Pair Corralation between Disney and CommScope Holding

Considering the 90-day investment horizon Walt Disney is expected to generate 0.37 times more return on investment than CommScope Holding. However, Walt Disney is 2.7 times less risky than CommScope Holding. It trades about -0.12 of its potential returns per unit of risk. CommScope Holding Co is currently generating about -0.46 per unit of risk. If you would invest  11,646  in Walt Disney on January 20, 2024 and sell it today you would lose (403.00) from holding Walt Disney or give up 3.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Walt Disney  vs.  CommScope Holding Co

Walt Disney

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, Disney unveiled solid returns over the last few months and may actually be approaching a breakup point.

CommScope Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CommScope Holding Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Disney and CommScope Holding

The main advantage of trading using opposite Disney and CommScope Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney position performs unexpectedly, CommScope 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 CommScope Holding will offset losses from the drop in CommScope Holding's long position.

The idea behind Walt Disney and CommScope 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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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 the Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.