Correlation Between Disney and First National

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

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

Diversification Opportunities for Disney and First National

0.81

Correlation Coefficient

Disney  First National

Very poor diversification

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

Pair Corralation between Disney and First National

Considering the 90-day investment horizon Walt Disney is expected to under-perform the First National. But the stock apears to be less risky and, when comparing its historical volatility, Walt Disney is 1.86 times less risky than First National. The stock trades about -0.26 of its potential returns per unit of risk. The First National Bank is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  23,000  in First National Bank on October 11, 2024 and sell it today you would lose (685.00) from holding First National Bank or give up 2.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Walt Disney  vs.  First National Bank

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

First National Bank

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First National Bank are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, First National may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Disney and First National

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

The idea behind Walt Disney and First National Bank 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 Anywhere module to track or share privately all of your investments from the convenience of any device.