Correlation Between Disney and Optimize Strategy

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

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

Diversification Opportunities for Disney and Optimize Strategy

0.81

Correlation Coefficient

Disney  Optimize Strategy

Very poor diversification

The 3 months correlation between Disney and Optimize is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Optimize Strategy Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optimize Strategy Index 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 Optimize Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optimize Strategy Index has no effect on the direction of Disney i.e., Disney and Optimize Strategy go up and down completely randomly.

Pair Corralation between Disney and Optimize Strategy

Considering the 90-day investment horizon Walt Disney is expected to under-perform the Optimize Strategy. In addition to that, Disney is 1.18 times more volatile than Optimize Strategy Index. It trades about -0.11 of its total potential returns per unit of risk. Optimize Strategy Index is currently generating about -0.09 per unit of volatility. If you would invest  2,952  in Optimize Strategy Index on December 29, 2024 and sell it today you would lose (192.00) from holding Optimize Strategy Index or give up 6.5% of portfolio value over 90 days.

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

Walt Disney  vs.  Optimize Strategy Index

Walt Disney

Risk-Adjusted Performance

Very Weak

Over the last 90 days Walt Disney has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's forward indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Optimize Strategy Index

Risk-Adjusted Performance

Very Weak

Over the last 90 days Optimize Strategy Index has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with Disney and Optimize Strategy

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

The idea behind Walt Disney and Optimize Strategy Index 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.