Correlation Between Disney and Invesco SP

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

By analyzing existing cross correlation between Walt Disney and Invesco SP 500, you can compare the effects of market volatilities on Disney and Invesco SP 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 Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and Invesco SP.

Diversification Opportunities for Disney and Invesco SP

0.91

Correlation Coefficient

Disney  Invesco SP

Almost no diversification

The 3 months correlation between Disney and Invesco is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Invesco SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP 500 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 Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP 500 has no effect on the direction of Disney i.e., Disney and Invesco SP go up and down completely randomly.

Pair Corralation between Disney and Invesco SP

Considering the 90-day investment horizon Walt Disney is expected to generate 1.8 times more return on investment than Invesco SP. However, Disney is 1.8 times more volatile than Invesco SP 500. It trades about 0.04 of its potential returns per unit of risk. Invesco SP 500 is currently generating about 0.06 per unit of risk. If you would invest  8,582  in Walt Disney on September 20, 2024 and sell it today you would earn a total of  2,554  from holding Walt Disney or generate 29.76% return on investment over 90 days.

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

Walt Disney  vs.  Invesco SP 500

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

Invesco SP 500

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP 500 are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental drivers, Invesco SP is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Disney and Invesco SP

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

The idea behind Walt Disney and Invesco SP 500 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.