Correlation Between Disney and Fastly

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

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

Diversification Opportunities for Disney and Fastly

0.59

Correlation Coefficient

Disney  Fastly

Very weak diversification

The 3 months correlation between Disney and Fastly is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Fastly Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fastly Inc 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 Fastly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fastly Inc has no effect on the direction of Disney i.e., Disney and Fastly go up and down completely randomly.

Pair Corralation between Disney and Fastly

Considering the 90-day investment horizon Disney is expected to generate 2.8 times less return on investment than Fastly. But when comparing it to its historical volatility, Walt Disney is 3.66 times less risky than Fastly. It trades about 0.18 of its potential returns per unit of risk. Fastly Inc is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  733.00  in Fastly Inc on October 26, 2024 and sell it today you would earn a total of  311.00  from holding Fastly Inc or generate 42.43% return on investment over 90 days.

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

Walt Disney  vs.  Fastly Inc

Walt Disney

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 14 (%) 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.

Fastly Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fastly Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady essential indicators, Fastly showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Disney and Fastly

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

The idea behind Walt Disney and Fastly Inc 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.