Correlation Between Disney and IShares ESG

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

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

Diversification Opportunities for Disney and IShares ESG

0.8

Correlation Coefficient

Disney  IShares ESG

Very poor diversification

The 3 months correlation between Disney and IShares is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and iShares ESG Screened in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG Screened 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 IShares ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares ESG Screened has no effect on the direction of Disney i.e., Disney and IShares ESG go up and down completely randomly.

Pair Corralation between Disney and IShares ESG

Considering the 90-day investment horizon Walt Disney is expected to under-perform the IShares ESG. In addition to that, Disney is 1.26 times more volatile than iShares ESG Screened. It trades about -0.13 of its total potential returns per unit of risk. iShares ESG Screened is currently generating about -0.11 per unit of volatility. If you would invest  4,140  in iShares ESG Screened on December 20, 2024 and sell it today you would lose (310.00) from holding iShares ESG Screened or give up 7.49% 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.  iShares ESG Screened

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.

iShares ESG Screened

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares ESG Screened has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest inconsistent performance, the Etf's forward-looking indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

Pair Trading with Disney and IShares ESG

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

The idea behind Walt Disney and iShares ESG Screened 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.