Correlation Between Disney and SPDR SP

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

Diversification Opportunities for Disney and SPDR SP

0.66

Correlation Coefficient

Disney  SPDR SP

Poor diversification

The 3 months correlation between Disney and SPDR is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and SPDR SP Kensho in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Kensho 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 SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Kensho has no effect on the direction of Disney i.e., Disney and SPDR SP go up and down completely randomly.

Pair Corralation between Disney and SPDR SP

Considering the 90-day investment horizon Walt Disney is expected to under-perform the SPDR SP. But the stock apears to be less risky and, when comparing its historical volatility, Walt Disney is 1.09 times less risky than SPDR SP. The stock trades about -0.11 of its potential returns per unit of risk. The SPDR SP Kensho is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  5,820  in SPDR SP Kensho on December 26, 2024 and sell it today you would lose (256.00) from holding SPDR SP Kensho or give up 4.4% of portfolio value over 90 days.

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

Walt Disney  vs.  SPDR SP Kensho

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.

SPDR SP Kensho

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR SP Kensho has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward-looking signals, SPDR SP is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Disney and SPDR SP

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

The idea behind Walt Disney and SPDR SP Kensho 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.