Correlation Between Walt Disney and Cable One

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

By analyzing existing cross correlation between The Walt Disney and Cable One, you can compare the effects of market volatilities on Walt Disney and Cable One 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 Walt Disney with a short position of Cable One. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walt Disney and Cable One.

Diversification Opportunities for Walt Disney and Cable One

0.63

Correlation Coefficient

Walt Disney  Cable One

Poor diversification

The 3 months correlation between Walt and Cable is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding The Walt Disney and Cable One in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cable One and Walt 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 The Walt Disney are associated (or correlated) with Cable One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cable One has no effect on the direction of Walt Disney i.e., Walt Disney and Cable One go up and down completely randomly.

Pair Corralation between Walt Disney and Cable One

Assuming the 90 days trading horizon The Walt Disney is expected to generate 0.48 times more return on investment than Cable One. However, The Walt Disney is 2.07 times less risky than Cable One. It trades about -0.16 of its potential returns per unit of risk. Cable One is currently generating about -0.14 per unit of risk. If you would invest  4,574  in The Walt Disney on December 30, 2024 and sell it today you would lose (818.00) from holding The Walt Disney or give up 17.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

The Walt Disney  vs.  Cable One

Walt Disney

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Walt Disney has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Cable One

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cable One has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Walt Disney and Cable One

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

The idea behind The Walt Disney and Cable One 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.