Correlation Between Disney and Boeing

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

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

Diversification Opportunities for Disney and Boeing

0.35

Correlation Coefficient

Disney  Boeing

Weak diversification

The 3 months correlation between Disney and Boeing is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and The Boeing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boeing 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 Walt Disney are associated (or correlated) with Boeing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boeing has no effect on the direction of Disney i.e., Disney and Boeing go up and down completely randomly.

Pair Corralation between Disney and Boeing

Considering the 90-day investment horizon Walt Disney is expected to generate 0.72 times more return on investment than Boeing. However, Walt Disney is 1.39 times less risky than Boeing. It trades about 0.02 of its potential returns per unit of risk. The Boeing is currently generating about -0.04 per unit of risk. If you would invest  10,831  in Walt Disney on October 7, 2024 and sell it today you would earn a total of  285.00  from holding Walt Disney or generate 2.63% return on investment over 90 days.

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

Walt Disney  vs.  The Boeing

Walt Disney

Risk-Adjusted Performance

17 of 100

Solid

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

Boeing

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with Disney and Boeing

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

The idea behind Walt Disney and The Boeing 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.