Correlation Between Nexstar Broadcasting and Disney

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

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

Diversification Opportunities for Nexstar Broadcasting and Disney

-0.4

Correlation Coefficient

Nexstar Broadcasting  Disney

Very good diversification

The 3 months correlation between Nexstar and Disney is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Nexstar Broadcasting Group and Walt Disney in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walt Disney and Nexstar Broadcasting 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 Nexstar Broadcasting Group 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 Nexstar Broadcasting i.e., Nexstar Broadcasting and Disney go up and down completely randomly.

Pair Corralation between Nexstar Broadcasting and Disney

Given the investment horizon of 90 days Nexstar Broadcasting Group is expected to generate 1.31 times more return on investment than Disney. However, Nexstar Broadcasting is 1.31 times more volatile than Walt Disney. It trades about -0.21 of its potential returns per unit of risk. Walt Disney is currently generating about -0.3 per unit of risk. If you would invest  17,013  in Nexstar Broadcasting Group on January 29, 2024 and sell it today you would lose (1,121) from holding Nexstar Broadcasting Group or give up 6.59% of portfolio value over 90 days.

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

Nexstar Broadcasting Group  vs.  Walt Disney

Nexstar Broadcasting

Risk-Adjusted Performance

0 of 100

Very Weak

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

Walt Disney

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent forward indicators, Disney unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nexstar Broadcasting and Disney

The main advantage of trading using opposite Nexstar Broadcasting and Disney positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nexstar Broadcasting 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 Nexstar Broadcasting Group 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.