Correlation Between US Bancorp and Disney

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

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

Diversification Opportunities for US Bancorp and Disney

0.88

Correlation Coefficient

US Bancorp  Disney

Very poor diversification

The 3 months correlation between USB and Disney is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding US Bancorp and The Walt Disney in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walt Disney and US Bancorp 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 US Bancorp are associated (or correlated) with Disney. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walt Disney has no effect on the direction of US Bancorp i.e., US Bancorp and Disney go up and down completely randomly.

Pair Corralation between US Bancorp and Disney

Assuming the 90 days trading horizon US Bancorp is expected to under-perform the Disney. But the stock apears to be less risky and, when comparing its historical volatility, US Bancorp is 1.35 times less risky than Disney. The stock trades about -0.17 of its potential returns per unit of risk. The The Walt Disney is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  227,800  in The Walt Disney on December 26, 2024 and sell it today you would lose (24,600) from holding The Walt Disney or give up 10.8% of portfolio value over 90 days.

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

US Bancorp  vs.  The Walt Disney

US Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days US Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with US Bancorp and Disney

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

The idea behind US Bancorp and The Walt Disney 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.