Correlation Between Disney and VODAFONE

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

Diversification Opportunities for Disney and VODAFONE

0.23
  Correlation Coefficient

Modest diversification

The 3 months correlation between Disney and VODAFONE is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and VODAFONE GROUP PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VODAFONE GROUP PLC 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 VODAFONE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VODAFONE GROUP PLC has no effect on the direction of Disney i.e., Disney and VODAFONE go up and down completely randomly.

Pair Corralation between Disney and VODAFONE

Considering the 90-day investment horizon Walt Disney is expected to generate 1.37 times more return on investment than VODAFONE. However, Disney is 1.37 times more volatile than VODAFONE GROUP PLC. It trades about 0.02 of its potential returns per unit of risk. VODAFONE GROUP PLC is currently generating about 0.01 per unit of risk. If you would invest  10,084  in Walt Disney on November 9, 2024 and sell it today you would earn a total of  1,125  from holding Walt Disney or generate 11.16% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy86.21%
ValuesDaily Returns

Walt Disney  vs.  VODAFONE GROUP PLC

 Performance 
       Timeline  
Walt Disney 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, Disney may actually be approaching a critical reversion point that can send shares even higher in March 2025.
VODAFONE GROUP PLC 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days VODAFONE GROUP PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, VODAFONE is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Disney and VODAFONE Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Disney and VODAFONE

The main advantage of trading using opposite Disney and VODAFONE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney position performs unexpectedly, VODAFONE 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 VODAFONE will offset losses from the drop in VODAFONE's long position.
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The idea behind Walt Disney and VODAFONE GROUP PLC 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.
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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.

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