Correlation Between Disney and IShares MSCI

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

Diversification Opportunities for Disney and IShares MSCI

0.86

Correlation Coefficient

Disney  IShares MSCI

Very poor diversification

The 3 months correlation between Disney and IShares is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and iShares MSCI USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI USA 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 MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI USA has no effect on the direction of Disney i.e., Disney and IShares MSCI go up and down completely randomly.

Pair Corralation between Disney and IShares MSCI

Considering the 90-day investment horizon Walt Disney is expected to generate 1.89 times more return on investment than IShares MSCI. However, Disney is 1.89 times more volatile than iShares MSCI USA. It trades about 0.2 of its potential returns per unit of risk. iShares MSCI USA is currently generating about 0.08 per unit of risk. If you would invest  9,351  in Walt Disney on September 25, 2024 and sell it today you would earn a total of  1,789  from holding Walt Disney or generate 19.13% 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.  iShares MSCI USA

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

iShares MSCI USA

Risk-Adjusted Performance

6 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI USA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, IShares MSCI is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Disney and IShares MSCI

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

The idea behind Walt Disney and iShares MSCI USA 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..