Correlation Between Disney and MARATHON

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

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

Diversification Opportunities for Disney and MARATHON

-0.51

Correlation Coefficient

Disney  MARATHON

Excellent diversification

The 3 months correlation between Disney and MARATHON is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and MARATHON PETE P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MARATHON PETE P 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 MARATHON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MARATHON PETE P has no effect on the direction of Disney i.e., Disney and MARATHON go up and down completely randomly.

Pair Corralation between Disney and MARATHON

Considering the 90-day investment horizon Walt Disney is expected to under-perform the MARATHON. But the stock apears to be less risky and, when comparing its historical volatility, Walt Disney is 3.4 times less risky than MARATHON. The stock trades about -0.18 of its potential returns per unit of risk. The MARATHON PETE P is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  10,000  in MARATHON PETE P on October 10, 2024 and sell it today you would earn a total of  87.00  from holding MARATHON PETE P or generate 0.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	90.0%
Values	Daily Returns

Walt Disney  vs.  MARATHON PETE P

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

MARATHON PETE P

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MARATHON PETE P are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, MARATHON is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Disney and MARATHON

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

The idea behind Walt Disney and MARATHON PETE P 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.