Correlation Between Verizon Communications and Disney

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

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

Diversification Opportunities for Verizon Communications and Disney

-0.03

Correlation Coefficient

Verizon Communications  Disney

Good diversification

The 3 months correlation between Verizon and Disney is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Walt Disney in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walt Disney and Verizon Communications 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 Verizon Communications 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 Verizon Communications i.e., Verizon Communications and Disney go up and down completely randomly.

Pair Corralation between Verizon Communications and Disney

Allowing for the 90-day total investment horizon Verizon Communications is expected to under-perform the Disney. But the stock apears to be less risky and, when comparing its historical volatility, Verizon Communications is 1.04 times less risky than Disney. The stock trades about -0.12 of its potential returns per unit of risk. The Walt Disney is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  9,619  in Walt Disney on October 20, 2024 and sell it today you would earn a total of  1,083  from holding Walt Disney or generate 11.26% return on investment over 90 days.

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

Verizon Communications  vs.  Walt Disney

Verizon Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Verizon Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain 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.

Walt Disney

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting forward indicators, Disney may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Verizon Communications and Disney

The main advantage of trading using opposite Verizon Communications and Disney positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications 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 Verizon Communications and 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.