Correlation Between Paramount Global and Disney

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

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

Diversification Opportunities for Paramount Global and Disney

-0.63

Correlation Coefficient

Paramount Global  Disney

Excellent diversification

The 3 months correlation between Paramount and Disney is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Paramount Global Class and Walt Disney in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walt Disney and Paramount Global 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 Paramount Global Class 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 Paramount Global i.e., Paramount Global and Disney go up and down completely randomly.

Pair Corralation between Paramount Global and Disney

Given the investment horizon of 90 days Paramount Global Class is expected to generate 5.25 times more return on investment than Disney. However, Paramount Global is 5.25 times more volatile than Walt Disney. It trades about 0.0 of its potential returns per unit of risk. Walt Disney is currently generating about -0.35 per unit of risk. If you would invest  1,175  in Paramount Global Class on February 1, 2024 and sell it today you would lose (36.00) from holding Paramount Global Class or give up 3.06% of portfolio value over 90 days.

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

Paramount Global Class  vs.  Walt Disney

Paramount Global Class

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Paramount Global Class has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat 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.

Walt Disney

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating forward indicators, Disney unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Paramount Global and Disney

The main advantage of trading using opposite Paramount Global and Disney positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Paramount Global 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 Paramount Global Class 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.