Correlation Between Disney and IShares SP
Can any of the company-specific risk be diversified away by investing in both Disney and IShares 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 IShares 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 iShares SP 500, you can compare the effects of market volatilities on Disney and IShares 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 IShares SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and IShares SP.
Diversification Opportunities for Disney and IShares SP
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Disney and IShares is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and iShares SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SP 500 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 IShares SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SP 500 has no effect on the direction of Disney i.e., Disney and IShares SP go up and down completely randomly.
Pair Corralation between Disney and IShares SP
Considering the 90-day investment horizon Disney is expected to generate 1.74 times less return on investment than IShares SP. In addition to that, Disney is 1.7 times more volatile than iShares SP 500. It trades about 0.04 of its total potential returns per unit of risk. iShares SP 500 is currently generating about 0.11 per unit of volatility. If you would invest 5,993 in iShares SP 500 on August 30, 2024 and sell it today you would earn a total of 4,001 from holding iShares SP 500 or generate 66.76% 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. iShares SP 500
Performance |
| Timeline |
| Walt Disney |
| iShares SP 500 |
Disney and IShares SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Disney and IShares SP
The main advantage of trading using opposite Disney and IShares SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney position performs unexpectedly, IShares 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 IShares SP will offset losses from the drop in IShares SP's long position.| Disney vs. Roku Inc | Disney vs. AMC Entertainment Holdings | Disney vs. Paramount Global Class | Disney vs. Warner Bros Discovery |
| IShares SP vs. FT Vest Equity | IShares SP vs. Northern Lights | IShares SP vs. Dimensional International High | IShares SP vs. First Trust Exchange Traded |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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