Correlation Between Disney and ESE Entertainment
Can any of the company-specific risk be diversified away by investing in both Disney and ESE Entertainment 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 ESE Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walt Disney and ESE Entertainment, you can compare the effects of market volatilities on Disney and ESE Entertainment 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 ESE Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and ESE Entertainment.
Diversification Opportunities for Disney and ESE Entertainment
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Disney and ESE is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and ESE Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESE Entertainment 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 ESE Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESE Entertainment has no effect on the direction of Disney i.e., Disney and ESE Entertainment go up and down completely randomly.
Pair Corralation between Disney and ESE Entertainment
Considering the 90-day investment horizon Walt Disney is expected to generate 0.2 times more return on investment than ESE Entertainment. However, Walt Disney is 5.1 times less risky than ESE Entertainment. It trades about 0.01 of its potential returns per unit of risk. ESE Entertainment is currently generating about -0.01 per unit of risk. If you would invest 11,681 in Walt Disney on September 3, 2024 and sell it today you would earn a total of 66.00 from holding Walt Disney or generate 0.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walt Disney vs. ESE Entertainment
Performance |
| Timeline |
| Walt Disney |
| ESE Entertainment |
Disney and ESE Entertainment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Disney and ESE Entertainment
The main advantage of trading using opposite Disney and ESE Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney position performs unexpectedly, ESE Entertainment 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 ESE Entertainment will offset losses from the drop in ESE Entertainment's long position.| Disney vs. Roku Inc | Disney vs. AMC Entertainment Holdings | Disney vs. Paramount Global Class | Disney vs. Warner Bros Discovery |
| ESE Entertainment vs. New Wave Holdings | ESE Entertainment vs. ZoomerMedia Limited | ESE Entertainment vs. OverActive Media Corp | ESE Entertainment vs. Network Media Group |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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