Correlation Between Disney and Goldman Sachs

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

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

Diversification Opportunities for Disney and Goldman Sachs

0.33

Correlation Coefficient

Disney  Goldman Sachs

Weak diversification

The 3 months correlation between Disney and Goldman is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Goldman Sachs MarketBeta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs MarketBeta 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 Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs MarketBeta has no effect on the direction of Disney i.e., Disney and Goldman Sachs go up and down completely randomly.

Pair Corralation between Disney and Goldman Sachs

Considering the 90-day investment horizon Walt Disney is expected to generate 1.63 times more return on investment than Goldman Sachs. However, Disney is 1.63 times more volatile than Goldman Sachs MarketBeta. It trades about 0.18 of its potential returns per unit of risk. Goldman Sachs MarketBeta is currently generating about 0.11 per unit of risk. If you would invest  9,578  in Walt Disney on October 27, 2024 and sell it today you would earn a total of  1,526  from holding Walt Disney or generate 15.93% return on investment over 90 days.

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

Walt Disney  vs.  Goldman Sachs MarketBeta

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

Goldman Sachs MarketBeta

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs MarketBeta are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Goldman Sachs is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Disney and Goldman Sachs

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

The idea behind Walt Disney and Goldman Sachs MarketBeta 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.