Correlation Between Disney and Whiting Petroleum

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

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

Diversification Opportunities for Disney and Whiting Petroleum

-0.34

Correlation Coefficient

Disney  Whiting Petroleum

Very good diversification

The 3 months correlation between Disney and Whiting is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Whiting Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whiting Petroleum 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 Whiting Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whiting Petroleum has no effect on the direction of Disney i.e., Disney and Whiting Petroleum go up and down completely randomly.

Pair Corralation between Disney and Whiting Petroleum

If you would invest  9,461  in Walt Disney on October 25, 2024 and sell it today you would earn a total of  1,642  from holding Walt Disney or generate 17.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.67%
Values	Daily Returns

Walt Disney  vs.  Whiting Petroleum

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.

Whiting Petroleum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Whiting Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Whiting Petroleum is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Disney and Whiting Petroleum

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

The idea behind Walt Disney and Whiting Petroleum 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.