Correlation Between Equinix and Disney

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

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

Diversification Opportunities for Equinix and Disney

0.09

Correlation Coefficient

Equinix  Disney

Significant diversification

The 3 months correlation between Equinix and Disney is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Equinix and Walt Disney in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walt Disney and Equinix 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 Equinix 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 Equinix i.e., Equinix and Disney go up and down completely randomly.

Pair Corralation between Equinix and Disney

Given the investment horizon of 90 days Equinix is expected to under-perform the Disney. In addition to that, Equinix is 1.05 times more volatile than Walt Disney. It trades about -0.46 of its total potential returns per unit of risk. Walt Disney is currently generating about -0.02 per unit of volatility. If you would invest  11,385  in Walt Disney on January 17, 2024 and sell it today you would lose (90.00) from holding Walt Disney or give up 0.79% of portfolio value over 90 days.

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

Equinix  vs.  Walt Disney

Equinix

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equinix has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, Equinix is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Walt Disney

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward indicators, Disney unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Equinix and Disney

The main advantage of trading using opposite Equinix and Disney positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equinix 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.

The idea behind Equinix 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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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 Stocks Directory module to find actively traded stocks across global markets.