Correlation Between Disney and SPDR SP
Can any of the company-specific risk be diversified away by investing in both Disney and SPDR SP 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 SPDR SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walt Disney and SPDR SP Kensho, you can compare the effects of market volatilities on Disney and SPDR SP 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 SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and SPDR SP.
Diversification Opportunities for Disney and SPDR SP
Very poor diversification
The 3 months correlation between Disney and SPDR is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and SPDR SP Kensho in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Kensho 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 SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Kensho has no effect on the direction of Disney i.e., Disney and SPDR SP go up and down completely randomly.
Pair Corralation between Disney and SPDR SP
Considering the 90-day investment horizon Walt Disney is expected to generate 1.19 times more return on investment than SPDR SP. However, Disney is 1.19 times more volatile than SPDR SP Kensho. It trades about 0.53 of its potential returns per unit of risk. SPDR SP Kensho is currently generating about 0.27 per unit of risk. If you would invest 9,508 in Walt Disney on August 31, 2024 and sell it today you would earn a total of 2,252 from holding Walt Disney or generate 23.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walt Disney vs. SPDR SP Kensho
Performance |
| Timeline |
| Walt Disney |
| SPDR SP Kensho |
Disney and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Disney and SPDR SP
The main advantage of trading using opposite Disney and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney position performs unexpectedly, SPDR SP 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 SPDR SP will offset losses from the drop in SPDR SP's long position.| Disney vs. Roku Inc | Disney vs. AMC Entertainment Holdings | Disney vs. Paramount Global Class | Disney vs. Warner Bros Discovery |
| SPDR SP vs. Nexalin Technology | SPDR SP vs. Kilroy Realty Corp | SPDR SP vs. Highwoods Properties | SPDR SP vs. Karat Packaging |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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