Correlation Between Disney and ProShares Trust

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

Diversification Opportunities for Disney and ProShares Trust

0.88

Correlation Coefficient

Disney  ProShares Trust

Very poor diversification

The 3 months correlation between Disney and ProShares is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and ProShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Trust 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 Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Trust has no effect on the direction of Disney i.e., Disney and ProShares Trust go up and down completely randomly.

Pair Corralation between Disney and ProShares Trust

Considering the 90-day investment horizon Disney is expected to generate 3.25 times less return on investment than ProShares Trust. But when comparing it to its historical volatility, Walt Disney is 5.97 times less risky than ProShares Trust. It trades about 0.29 of its potential returns per unit of risk. ProShares Trust is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,444  in ProShares Trust on August 30, 2024 and sell it today you would earn a total of  1,339  from holding ProShares Trust or generate 92.73% 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.  ProShares Trust

Walt Disney

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 23 (%) 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.

ProShares Trust

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Trust are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical indicators, ProShares Trust unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Disney and ProShares Trust

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

The idea behind Walt Disney and ProShares Trust 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.