Correlation Between Disney and Advance Auto
Can any of the company-specific risk be diversified away by investing in both Disney and Advance Auto 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 Advance Auto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walt Disney and Advance Auto Parts, you can compare the effects of market volatilities on Disney and Advance Auto 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 Advance Auto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and Advance Auto.
Diversification Opportunities for Disney and Advance Auto
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Disney and Advance is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Advance Auto Parts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advance Auto Parts 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 Walt Disney are associated (or correlated) with Advance Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advance Auto Parts has no effect on the direction of Disney i.e., Disney and Advance Auto go up and down completely randomly.
Pair Corralation between Disney and Advance Auto
Considering the 90-day investment horizon Disney is expected to generate 1.78 times less return on investment than Advance Auto. But when comparing it to its historical volatility, Walt Disney is 2.15 times less risky than Advance Auto. It trades about 0.13 of its potential returns per unit of risk. Advance Auto Parts is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 4,788 in Advance Auto Parts on November 2, 2024 and sell it today you would earn a total of 191.00 from holding Advance Auto Parts or generate 3.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walt Disney vs. Advance Auto Parts
Performance |
| Timeline |
| Walt Disney |
| Advance Auto Parts |
Disney and Advance Auto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Disney and Advance Auto
The main advantage of trading using opposite Disney and Advance Auto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney position performs unexpectedly, Advance Auto 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 Advance Auto will offset losses from the drop in Advance Auto's long position.| Disney vs. Liberty Media | Disney vs. Atlanta Braves Holdings, | Disney vs. News Corp B | Disney vs. News Corp A |
| Advance Auto vs. AutoZone | Advance Auto vs. Tractor Supply | Advance Auto vs. Genuine Parts Co | Advance Auto vs. Five Below |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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