Correlation Between Disney and Stone Ridge
Can any of the company-specific risk be diversified away by investing in both Disney and Stone Ridge 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 Stone Ridge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walt Disney and Stone Ridge 2055, you can compare the effects of market volatilities on Disney and Stone Ridge 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 Stone Ridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and Stone Ridge.
Diversification Opportunities for Disney and Stone Ridge
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Disney and Stone is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Stone Ridge 2055 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stone Ridge 2055 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 Stone Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stone Ridge 2055 has no effect on the direction of Disney i.e., Disney and Stone Ridge go up and down completely randomly.
Pair Corralation between Disney and Stone Ridge
Considering the 90-day investment horizon Walt Disney is expected to generate 3.25 times more return on investment than Stone Ridge. However, Disney is 3.25 times more volatile than Stone Ridge 2055. It trades about 0.51 of its potential returns per unit of risk. Stone Ridge 2055 is currently generating about 0.05 per unit of risk. If you would invest 9,620 in Walt Disney on September 1, 2024 and sell it today you would earn a total of 2,127 from holding Walt Disney or generate 22.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Walt Disney vs. Stone Ridge 2055
Performance |
| Timeline |
| Walt Disney |
| Stone Ridge 2055 |
Disney and Stone Ridge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Disney and Stone Ridge
The main advantage of trading using opposite Disney and Stone Ridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney position performs unexpectedly, Stone Ridge 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 Stone Ridge will offset losses from the drop in Stone Ridge's long position.| Disney vs. ADTRAN Inc | Disney vs. Belden Inc | Disney vs. ADC Therapeutics SA | Disney vs. Comtech Telecommunications Corp |
| Stone Ridge vs. Proshares Russell 2000 | Stone Ridge vs. Tidal Trust II | Stone Ridge vs. PIMCO Mortgage Backed Securities | Stone Ridge vs. iShares Trust |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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