Correlation Between Disney and ProShares

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

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

Diversification Opportunities for Disney and ProShares

0.83

Correlation Coefficient

Disney  ProShares

Very poor diversification

The 3 months correlation between Disney and ProShares is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and ProShares SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares 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 ProShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares SP 500 has no effect on the direction of Disney i.e., Disney and ProShares go up and down completely randomly.

Pair Corralation between Disney and ProShares

Considering the 90-day investment horizon Walt Disney is expected to under-perform the ProShares. But the stock apears to be less risky and, when comparing its historical volatility, Walt Disney is 1.3 times less risky than ProShares. The stock trades about -0.2 of its potential returns per unit of risk. The ProShares SP 500 is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  6,493  in ProShares SP 500 on October 8, 2024 and sell it today you would lose (103.00) from holding ProShares SP 500 or give up 1.59% 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.  ProShares SP 500

Walt Disney

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 17 (%) 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.

ProShares SP 500

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares SP 500 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, ProShares is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Disney and ProShares

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

The idea behind Walt Disney and ProShares 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.

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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.