Correlation Between Disney and ProShares Large

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

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

Diversification Opportunities for Disney and ProShares Large

0.81

Correlation Coefficient

Disney  ProShares Large

Very poor diversification

The 3 months correlation between Disney and ProShares is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and ProShares Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Large Cap 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 ProShares Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Large Cap has no effect on the direction of Disney i.e., Disney and ProShares Large go up and down completely randomly.

Pair Corralation between Disney and ProShares Large

Considering the 90-day investment horizon Walt Disney is expected to generate 1.3 times more return on investment than ProShares Large. However, Disney is 1.3 times more volatile than ProShares Large Cap. It trades about -0.02 of its potential returns per unit of risk. ProShares Large Cap is currently generating about -0.08 per unit of risk. If you would invest  11,192  in Walt Disney on September 20, 2024 and sell it today you would lose (55.00) from holding Walt Disney or give up 0.49% of portfolio value over 90 days.

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

Walt Disney  vs.  ProShares Large Cap

Walt Disney

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 15 (%) 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.

ProShares Large Cap

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Large Cap are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, ProShares Large is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Disney and ProShares Large

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

The idea behind Walt Disney and ProShares Large Cap 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.