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

-0.53

Correlation Coefficient

Disney  Whiting Petroleum

Excellent diversification

The 3 months correlation between Disney and Whiting is -0.53. 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

Considering the 90-day investment horizon Walt Disney is expected to generate 0.12 times more return on investment than Whiting Petroleum. However, Walt Disney is 8.61 times less risky than Whiting Petroleum. It trades about 0.21 of its potential returns per unit of risk. Whiting Petroleum is currently generating about -0.06 per unit of risk. If you would invest  9,319  in Walt Disney on October 9, 2024 and sell it today you would earn a total of  1,786  from holding Walt Disney or generate 19.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Walt Disney  vs.  Whiting Petroleum

Walt Disney

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 16 (%) 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.

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 abnormal performance in the last few months, the Stock's fundamental drivers remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.