Correlation Between Disney and AMC Networks

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

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

Diversification Opportunities for Disney and AMC Networks

-0.76

Correlation Coefficient

Disney  AMC Networks

Pay attention - limited upside

The 3 months correlation between Disney and AMC is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and AMC Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMC Networks 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 AMC Networks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMC Networks has no effect on the direction of Disney i.e., Disney and AMC Networks go up and down completely randomly.

Pair Corralation between Disney and AMC Networks

Considering the 90-day investment horizon Walt Disney is expected to generate 0.46 times more return on investment than AMC Networks. However, Walt Disney is 2.18 times less risky than AMC Networks. It trades about -0.04 of its potential returns per unit of risk. AMC Networks is currently generating about -0.1 per unit of risk. If you would invest  11,054  in Walt Disney on February 8, 2024 and sell it today you would lose (515.00) from holding Walt Disney or give up 4.66% of portfolio value over 90 days.

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

Walt Disney  vs.  AMC Networks

Walt Disney

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Walt Disney has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

AMC Networks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AMC Networks has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Disney and AMC Networks

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

The idea behind Walt Disney and AMC Networks 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.