Correlation Between Disney and Simplify Macro

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

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

Diversification Opportunities for Disney and Simplify Macro

0.8

Correlation Coefficient

Disney  Simplify Macro

Very poor diversification

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

Pair Corralation between Disney and Simplify Macro

Considering the 90-day investment horizon Walt Disney is expected to generate 1.96 times more return on investment than Simplify Macro. However, Disney is 1.96 times more volatile than Simplify Macro Strategy. It trades about 0.08 of its potential returns per unit of risk. Simplify Macro Strategy is currently generating about 0.05 per unit of risk. If you would invest  10,105  in Walt Disney on September 13, 2024 and sell it today you would earn a total of  1,375  from holding Walt Disney or generate 13.61% 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.  Simplify Macro Strategy

Walt Disney

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 21 (%) 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.

Simplify Macro Strategy

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Simplify Macro Strategy are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, Simplify Macro is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Disney and Simplify Macro

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

The idea behind Walt Disney and Simplify Macro Strategy 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.

Check out your portfolio center.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.