Correlation Between Disney and Alkermes Plc

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

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

Diversification Opportunities for Disney and Alkermes Plc

0.55

Correlation Coefficient

Disney  Alkermes Plc

Very weak diversification

The 3 months correlation between Disney and Alkermes is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Alkermes Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alkermes Plc 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 Alkermes Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alkermes Plc has no effect on the direction of Disney i.e., Disney and Alkermes Plc go up and down completely randomly.

Pair Corralation between Disney and Alkermes Plc

Considering the 90-day investment horizon Walt Disney is expected to generate 1.35 times more return on investment than Alkermes Plc. However, Disney is 1.35 times more volatile than Alkermes Plc. It trades about 0.41 of its potential returns per unit of risk. Alkermes Plc is currently generating about 0.01 per unit of risk. If you would invest  9,081  in Walt Disney on March 2, 2025 and sell it today you would earn a total of  2,223  from holding Walt Disney or generate 24.48% return on investment over 90 days.

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

Walt Disney  vs.  Alkermes Plc

Walt Disney

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward indicators, Disney is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Alkermes Plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alkermes Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's forward-looking signals remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Disney and Alkermes Plc

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

The idea behind Walt Disney and Alkermes Plc 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.