Correlation Between Disney and Wahed FTSE

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Can any of the company-specific risk be diversified away by investing in both Disney and Wahed FTSE 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 Wahed FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walt Disney and Wahed FTSE USA, you can compare the effects of market volatilities on Disney and Wahed FTSE 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 Wahed FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and Wahed FTSE.

Diversification Opportunities for Disney and Wahed FTSE

0.78
  Correlation Coefficient

Poor diversification

The 3 months correlation between Disney and Wahed is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Wahed FTSE USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wahed FTSE USA 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 Wahed FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wahed FTSE USA has no effect on the direction of Disney i.e., Disney and Wahed FTSE go up and down completely randomly.

Pair Corralation between Disney and Wahed FTSE

Considering the 90-day investment horizon Walt Disney is expected to generate 3.21 times more return on investment than Wahed FTSE. However, Disney is 3.21 times more volatile than Wahed FTSE USA. It trades about 0.31 of its potential returns per unit of risk. Wahed FTSE USA is currently generating about 0.28 per unit of risk. If you would invest  10,086  in Walt Disney on September 12, 2024 and sell it today you would earn a total of  1,387  from holding Walt Disney or generate 13.75% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Walt Disney  vs.  Wahed FTSE USA

 Performance 
       Timeline  
Walt Disney 

Risk-Adjusted Performance

22 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward indicators, Disney unveiled solid returns over the last few months and may actually be approaching a breakup point.
Wahed FTSE USA 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Wahed FTSE USA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Wahed FTSE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Disney and Wahed FTSE Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Disney and Wahed FTSE

The main advantage of trading using opposite Disney and Wahed FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney position performs unexpectedly, Wahed FTSE 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 Wahed FTSE will offset losses from the drop in Wahed FTSE's long position.
The idea behind Walt Disney and Wahed FTSE USA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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