Correlation Between Disney and Grupo Sports

Can any of the company-specific risk be diversified away by investing in both Disney and Grupo Sports 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 Grupo Sports 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 Grupo Sports World, you can compare the effects of market volatilities on Disney and Grupo Sports 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 Grupo Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and Grupo Sports.

Diversification Opportunities for Disney and Grupo Sports

0.78

Correlation Coefficient

Disney  Grupo Sports

Poor diversification

The 3 months correlation between Disney and Grupo is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding The Walt Disney and Grupo Sports World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Sports World 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 Grupo Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Sports World has no effect on the direction of Disney i.e., Disney and Grupo Sports go up and down completely randomly.

Pair Corralation between Disney and Grupo Sports

Assuming the 90 days trading horizon Disney is expected to generate 3.6 times less return on investment than Grupo Sports. But when comparing it to its historical volatility, The Walt Disney is 1.2 times less risky than Grupo Sports. It trades about 0.03 of its potential returns per unit of risk. Grupo Sports World is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  297.00  in Grupo Sports World on October 11, 2024 and sell it today you would earn a total of  313.00  from holding Grupo Sports World or generate 105.39% return on investment over 90 days.

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

The Walt Disney  vs.  Grupo Sports World

Walt Disney

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Walt Disney are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Disney showed solid returns over the last few months and may actually be approaching a breakup point.

Grupo Sports World

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with Disney and Grupo Sports

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

The idea behind The Walt Disney and Grupo Sports World 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 Transaction History module to view history of all your transactions and understand their impact on performance.