Correlation Between Disney and FedEx
Can any of the company-specific risk be diversified away by investing in both Disney and FedEx 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 Disney and FedEx 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 FedEx, you can compare the effects of market volatilities on Disney and FedEx 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 Disney with a short position of FedEx. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and FedEx.
Diversification Opportunities for Disney and FedEx
Poor diversification
The 3 months correlation between Disney and FedEx is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding The Walt Disney and FedEx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FedEx and 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 FedEx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FedEx has no effect on the direction of Disney i.e., Disney and FedEx go up and down completely randomly.
Pair Corralation between Disney and FedEx
Assuming the 90 days trading horizon The Walt Disney is expected to generate 1.25 times more return on investment than FedEx. However, Disney is 1.25 times more volatile than FedEx. It trades about 0.25 of its potential returns per unit of risk. FedEx is currently generating about 0.11 per unit of risk. If you would invest 191,650 in The Walt Disney on September 19, 2024 and sell it today you would earn a total of 36,199 from holding The Walt Disney or generate 18.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Walt Disney vs. FedEx
Performance |
| Timeline |
| Walt Disney |
| FedEx |
Disney and FedEx Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Disney and FedEx
The main advantage of trading using opposite Disney and FedEx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney position performs unexpectedly, FedEx 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 FedEx will offset losses from the drop in FedEx's long position.| Disney vs. Micron Technology | Disney vs. Verizon Communications | Disney vs. Monster Beverage Corp | Disney vs. United Airlines Holdings |
| FedEx vs. Honeywell International | FedEx vs. The Walt Disney | FedEx vs. Netflix | FedEx vs. The Goodyear Tire |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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