Correlation Between Disney and Nexera Energy

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

Diversification Opportunities for Disney and Nexera Energy

-0.51
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Disney and Nexera is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Nexera Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexera Energy 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 Nexera Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexera Energy has no effect on the direction of Disney i.e., Disney and Nexera Energy go up and down completely randomly.

Pair Corralation between Disney and Nexera Energy

Considering the 90-day investment horizon Disney is expected to generate 259.64 times less return on investment than Nexera Energy. But when comparing it to its historical volatility, Walt Disney is 18.45 times less risky than Nexera Energy. It trades about 0.0 of its potential returns per unit of risk. Nexera Energy is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2.94  in Nexera Energy on December 30, 2023 and sell it today you would lose (2.58) from holding Nexera Energy or give up 87.76% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Walt Disney  vs.  Nexera Energy

 Performance 
       Timeline  
Walt Disney 

Risk-Adjusted Performance

20 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 20 (%) 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.
Nexera Energy 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Nexera Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Disney and Nexera Energy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Disney and Nexera Energy

The main advantage of trading using opposite Disney and Nexera Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney position performs unexpectedly, Nexera Energy 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 Nexera Energy will offset losses from the drop in Nexera Energy's long position.
The idea behind Walt Disney and Nexera Energy 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.
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 the Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.

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