Correlation Between Disney and Invesco DWA

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

Diversification Opportunities for Disney and Invesco DWA

0.23

Correlation Coefficient

Disney  Invesco DWA

Modest diversification

The 3 months correlation between Disney and Invesco is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Invesco DWA Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DWA Energy 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 DWA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DWA Energy has no effect on the direction of Disney i.e., Disney and Invesco DWA go up and down completely randomly.

Pair Corralation between Disney and Invesco DWA

Considering the 90-day investment horizon Walt Disney is expected to generate 0.81 times more return on investment than Invesco DWA. However, Walt Disney is 1.23 times less risky than Invesco DWA. It trades about -0.03 of its potential returns per unit of risk. Invesco DWA Energy is currently generating about -0.11 per unit of risk. If you would invest  11,105  in Walt Disney on December 5, 2024 and sell it today you would lose (204.00) from holding Walt Disney or give up 1.84% of portfolio value over 90 days.

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

Walt Disney  vs.  Invesco DWA Energy

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 comparatively stable forward indicators, Disney is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Invesco DWA Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco DWA Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the Etf traders.

Pair Trading with Disney and Invesco DWA

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

The idea behind Walt Disney and Invesco DWA Energy 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.