Correlation Between ViacomCBS and Walt Disney

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

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

Diversification Opportunities for ViacomCBS and Walt Disney

0.79

Correlation Coefficient

ViacomCBS  Walt Disney

Poor diversification

The 3 months correlation between ViacomCBS and Walt is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding ViacomCBS and The Walt Disney in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walt Disney and ViacomCBS 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 ViacomCBS are associated (or correlated) with Walt 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 ViacomCBS i.e., ViacomCBS and Walt Disney go up and down completely randomly.

Pair Corralation between ViacomCBS and Walt Disney

Assuming the 90 days trading horizon ViacomCBS is expected to generate 2.46 times less return on investment than Walt Disney. In addition to that, ViacomCBS is 1.19 times more volatile than The Walt Disney. It trades about 0.09 of its total potential returns per unit of risk. The Walt Disney is currently generating about 0.25 per unit of volatility. If you would invest  8,440  in The Walt Disney on September 26, 2024 and sell it today you would earn a total of  2,218  from holding The Walt Disney or generate 26.28% return on investment over 90 days.

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

ViacomCBS  vs.  The Walt Disney

ViacomCBS

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ViacomCBS are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ViacomCBS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Walt Disney

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Walt Disney are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Walt Disney unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ViacomCBS and Walt Disney

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

The idea behind ViacomCBS and The 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.