Correlation Between Disney and SPDR Galaxy

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

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

Diversification Opportunities for Disney and SPDR Galaxy

0.8

Correlation Coefficient

Disney  SPDR Galaxy

Very poor diversification

The 3 months correlation between Disney and SPDR is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and SPDR Galaxy Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Galaxy Digital 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 SPDR Galaxy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Galaxy Digital has no effect on the direction of Disney i.e., Disney and SPDR Galaxy go up and down completely randomly.

Pair Corralation between Disney and SPDR Galaxy

Considering the 90-day investment horizon Disney is expected to generate 6.63 times less return on investment than SPDR Galaxy. But when comparing it to its historical volatility, Walt Disney is 2.24 times less risky than SPDR Galaxy. It trades about 0.04 of its potential returns per unit of risk. SPDR Galaxy Digital is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,490  in SPDR Galaxy Digital on October 11, 2024 and sell it today you would earn a total of  977.00  from holding SPDR Galaxy Digital or generate 39.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	29.27%
Values	Daily Returns

Walt Disney  vs.  SPDR Galaxy Digital

Walt Disney

Risk-Adjusted Performance

15 of 100

Solid

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 conflicting forward indicators, Disney unveiled solid returns over the last few months and may actually be approaching a breakup point.

SPDR Galaxy Digital

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Galaxy Digital are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, SPDR Galaxy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Disney and SPDR Galaxy

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

The idea behind Walt Disney and SPDR Galaxy Digital 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 CEOs Directory module to screen CEOs from public companies around the world.