Correlation Between Microsoft and Walt Disney
Can any of the company-specific risk be diversified away by investing in both Microsoft and Walt Disney 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 Microsoft and Walt Disney into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and The Walt Disney, you can compare the effects of market volatilities on Microsoft and Walt Disney 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 Microsoft with a short position of Walt Disney. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Walt Disney.
Diversification Opportunities for Microsoft and Walt Disney
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Walt is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and The Walt Disney in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walt Disney and Microsoft 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 Microsoft are associated (or correlated) with Walt Disney. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walt Disney has no effect on the direction of Microsoft i.e., Microsoft and Walt Disney go up and down completely randomly.
Pair Corralation between Microsoft and Walt Disney
Given the investment horizon of 90 days Microsoft is expected to generate 26.12 times less return on investment than Walt Disney. But when comparing it to its historical volatility, Microsoft is 1.22 times less risky than Walt Disney. It trades about 0.02 of its potential returns per unit of risk. The Walt Disney is currently generating about 0.48 of returns per unit of risk over similar time horizon. If you would invest 8,874 in The Walt Disney on August 29, 2024 and sell it today you would earn a total of 2,160 from holding The Walt Disney or generate 24.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. The Walt Disney
Performance |
| Timeline |
| Microsoft |
| Walt Disney |
Microsoft and Walt Disney Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Walt Disney
The main advantage of trading using opposite Microsoft and Walt Disney positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Walt Disney 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 Walt Disney will offset losses from the drop in Walt Disney's long position.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
| Walt Disney vs. Superior Plus Corp | Walt Disney vs. NMI Holdings | Walt Disney vs. Origin Agritech | Walt Disney vs. SIVERS SEMICONDUCTORS AB |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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