Correlation Between Roku and Disney
Can any of the company-specific risk be diversified away by investing in both Roku and 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 Roku and Disney into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Roku Inc and Walt Disney, you can compare the effects of market volatilities on Roku and 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 Roku with a short position of Disney. Check out your portfolio center. Please also check ongoing floating volatility patterns of Roku and Disney.
Diversification Opportunities for Roku and Disney
Average diversification
The 3 months correlation between Roku and Disney is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Roku Inc and Walt Disney in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walt Disney and Roku 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 Roku Inc are associated (or correlated) with 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 Roku i.e., Roku and Disney go up and down completely randomly.
Pair Corralation between Roku and Disney
Given the investment horizon of 90 days Roku Inc is expected to generate 2.37 times more return on investment than Disney. However, Roku is 2.37 times more volatile than Walt Disney. It trades about 0.03 of its potential returns per unit of risk. Walt Disney is currently generating about 0.04 per unit of risk. If you would invest 5,120 in Roku Inc on August 27, 2024 and sell it today you would earn a total of 1,800 from holding Roku Inc or generate 35.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Roku Inc vs. Walt Disney
Performance |
| Timeline |
| Roku Inc |
| Walt Disney |
Roku and Disney Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Roku and Disney
The main advantage of trading using opposite Roku and Disney positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Roku position performs unexpectedly, 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 Disney will offset losses from the drop in Disney's long position.| Roku vs. Walt Disney | Roku vs. AMC Entertainment Holdings | Roku vs. Paramount Global Class | Roku vs. Warner Bros Discovery |
| Disney vs. Roku Inc | Disney vs. AMC Entertainment Holdings | Disney vs. Paramount Global Class | Disney vs. Warner Bros Discovery |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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