Correlation Between Disney and IShares Trust

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

Diversification Opportunities for Disney and IShares Trust

-0.42

Correlation Coefficient

Disney  IShares Trust

Very good diversification

The 3 months correlation between Disney and IShares is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and iShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares 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 IShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Trust has no effect on the direction of Disney i.e., Disney and IShares Trust go up and down completely randomly.

Pair Corralation between Disney and IShares Trust

Considering the 90-day investment horizon Walt Disney is expected to generate 6.73 times more return on investment than IShares Trust. However, Disney is 6.73 times more volatile than iShares Trust . It trades about 0.27 of its potential returns per unit of risk. iShares Trust is currently generating about -0.05 per unit of risk. If you would invest  9,055  in Walt Disney on September 13, 2024 and sell it today you would earn a total of  2,406  from holding Walt Disney or generate 26.57% return on investment over 90 days.

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

Walt Disney  vs.  iShares Trust

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.

iShares Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, IShares Trust is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Disney and IShares Trust

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

The idea behind Walt Disney and iShares 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .