Correlation Between Disney and Kinetics Global

Can any of the company-specific risk be diversified away by investing in both Disney and Kinetics Global 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 Kinetics Global into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Walt Disney and Kinetics Global Fund, you can compare the effects of market volatilities on Disney and Kinetics Global 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 Kinetics Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and Kinetics Global.

Diversification Opportunities for Disney and Kinetics Global

0.88

Correlation Coefficient

Disney  Kinetics Global

Very poor diversification

The 3 months correlation between Disney and Kinetics is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Kinetics Global Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinetics Global 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 Kinetics Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinetics Global has no effect on the direction of Disney i.e., Disney and Kinetics Global go up and down completely randomly.

Pair Corralation between Disney and Kinetics Global

Considering the 90-day investment horizon Walt Disney is expected to under-perform the Kinetics Global. But the stock apears to be less risky and, when comparing its historical volatility, Walt Disney is 1.21 times less risky than Kinetics Global. The stock trades about -0.19 of its potential returns per unit of risk. The Kinetics Global Fund is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,184  in Kinetics Global Fund on January 26, 2024 and sell it today you would lose (25.00) from holding Kinetics Global Fund or give up 2.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Walt Disney  vs.  Kinetics Global Fund

Walt Disney

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 12 (%) 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.

Kinetics Global

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetics Global Fund are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Kinetics Global showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Disney and Kinetics Global

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

The idea behind Walt Disney and Kinetics Global Fund 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.