Correlation Between Walt Disney and ViacomCBS

Can any of the company-specific risk be diversified away by investing in both Walt Disney and ViacomCBS 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 ViacomCBS 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 ViacomCBS, you can compare the effects of market volatilities on Walt Disney and ViacomCBS 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 ViacomCBS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walt Disney and ViacomCBS.

Diversification Opportunities for Walt Disney and ViacomCBS

0.93

Correlation Coefficient

Walt Disney  ViacomCBS

Almost no diversification

The 3 months correlation between Walt and ViacomCBS is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding The Walt Disney and ViacomCBS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ViacomCBS 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 ViacomCBS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ViacomCBS has no effect on the direction of Walt Disney i.e., Walt Disney and ViacomCBS go up and down completely randomly.

Pair Corralation between Walt Disney and ViacomCBS

Assuming the 90 days trading horizon The Walt Disney is expected to under-perform the ViacomCBS. But the stock apears to be less risky and, when comparing its historical volatility, The Walt Disney is 2.29 times less risky than ViacomCBS. The stock trades about -0.15 of its potential returns per unit of risk. The ViacomCBS is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,180  in ViacomCBS on September 25, 2024 and sell it today you would lose (20.00) from holding ViacomCBS or give up 0.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.45%
Values	Daily Returns

The Walt Disney  vs.  ViacomCBS

Walt Disney

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Walt Disney are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Walt Disney unveiled solid returns over the last few months and may actually be approaching a breakup point.

ViacomCBS

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ViacomCBS are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ViacomCBS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Walt Disney and ViacomCBS

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

The idea behind The Walt Disney and ViacomCBS 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.