Correlation Between Amazon and Walt Disney
Can any of the company-specific risk be diversified away by investing in both Amazon and Walt 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 Amazon and Walt Disney into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Walt Disney, you can compare the effects of market volatilities on Amazon and Walt 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 Amazon with a short position of Walt Disney. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Walt Disney.
Diversification Opportunities for Amazon and Walt Disney
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Amazon and Walt is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Walt Disney in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walt Disney and Amazon 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 Amazon Inc are associated (or correlated) with Walt 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 Amazon i.e., Amazon and Walt Disney go up and down completely randomly.
Pair Corralation between Amazon and Walt Disney
Assuming the 90 days trading horizon Amazon Inc is expected to generate 1.24 times more return on investment than Walt Disney. However, Amazon is 1.24 times more volatile than Walt Disney. It trades about 0.16 of its potential returns per unit of risk. Walt Disney is currently generating about 0.0 per unit of risk. If you would invest 179,500 in Amazon Inc on October 20, 2024 and sell it today you would earn a total of 8,000 from holding Amazon Inc or generate 4.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amazon Inc vs. Walt Disney
Performance |
| Timeline |
| Amazon Inc |
| Walt Disney |
Amazon and Walt Disney Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Walt Disney
The main advantage of trading using opposite Amazon and Walt Disney positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Walt 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 Walt Disney will offset losses from the drop in Walt Disney's long position.| Amazon vs. Compania de Transporte | Amazon vs. Telecom Argentina | Amazon vs. Harmony Gold Mining | Amazon vs. Transportadora de Gas |
| Walt Disney vs. Walmart | Walt Disney vs. American Express Co | Walt Disney vs. QUALCOMM Incorporated | Walt Disney vs. United States Steel |
Check out your portfolio center.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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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