Correlation Between Disney and Archer Daniels

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Can any of the company-specific risk be diversified away by investing in both Disney and Archer Daniels 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 Archer Daniels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Walt Disney and Archer Daniels Midland, you can compare the effects of market volatilities on Disney and Archer Daniels 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 Archer Daniels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and Archer Daniels.

Diversification Opportunities for Disney and Archer Daniels

DisneyArcherDiversified AwayDisneyArcherDiversified Away100%
-0.84
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Disney and Archer is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding The Walt Disney and Archer Daniels Midland in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archer Daniels Midland 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 The Walt Disney are associated (or correlated) with Archer Daniels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Archer Daniels Midland has no effect on the direction of Disney i.e., Disney and Archer Daniels go up and down completely randomly.

Pair Corralation between Disney and Archer Daniels

Assuming the 90 days trading horizon The Walt Disney is expected to generate 1.17 times more return on investment than Archer Daniels. However, Disney is 1.17 times more volatile than Archer Daniels Midland. It trades about 0.28 of its potential returns per unit of risk. Archer Daniels Midland is currently generating about -0.11 per unit of risk. If you would invest  174,130  in The Walt Disney on September 13, 2024 and sell it today you would earn a total of  56,238  from holding The Walt Disney or generate 32.3% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

The Walt Disney  vs.  Archer Daniels Midland

 Performance 
JavaScript chart by amCharts 3.21.15OctNov -100102030
JavaScript chart by amCharts 3.21.15DIS ADM
       Timeline  
Walt Disney 

Risk-Adjusted Performance

21 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in The Walt Disney are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Disney showed solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec1,8001,9002,0002,1002,2002,3002,400
Archer Daniels Midland 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Archer Daniels Midland has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec1,0201,0401,0601,0801,1001,1201,1401,1601,180

Disney and Archer Daniels Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-5.04-3.77-2.51-1.240.02111.442.874.315.75 0.050.100.150.20
JavaScript chart by amCharts 3.21.15DIS ADM
       Returns  

Pair Trading with Disney and Archer Daniels

The main advantage of trading using opposite Disney and Archer Daniels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney position performs unexpectedly, Archer Daniels 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 Archer Daniels will offset losses from the drop in Archer Daniels' long position.
The idea behind The Walt Disney and Archer Daniels Midland 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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