Correlation Between Disney and DBS Group

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

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

Diversification Opportunities for Disney and DBS Group

0.81

Correlation Coefficient

Disney  DBS Group

Very poor diversification

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

Pair Corralation between Disney and DBS Group

Considering the 90-day investment horizon Disney is expected to generate 1.04 times less return on investment than DBS Group. But when comparing it to its historical volatility, Walt Disney is 2.84 times less risky than DBS Group. It trades about 0.17 of its potential returns per unit of risk. DBS Group Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,872  in DBS Group Holdings on September 30, 2024 and sell it today you would earn a total of  338.00  from holding DBS Group Holdings or generate 11.77% return on investment over 90 days.

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

Walt Disney  vs.  DBS Group Holdings

Walt Disney

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 13 (%) 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.

DBS Group Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DBS Group Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady fundamental indicators, DBS Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Disney and DBS Group

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

The idea behind Walt Disney and DBS Group Holdings 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..