Correlation Between Disney and Archer Aviation

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

Diversification Opportunities for Disney and Archer Aviation

0.87
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Disney and Archer is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Archer Aviation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archer Aviation 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 Archer Aviation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Archer Aviation has no effect on the direction of Disney i.e., Disney and Archer Aviation go up and down completely randomly.

Pair Corralation between Disney and Archer Aviation

Considering the 90-day investment horizon Walt Disney is expected to generate 0.72 times more return on investment than Archer Aviation. However, Walt Disney is 1.38 times less risky than Archer Aviation. It trades about -0.06 of its potential returns per unit of risk. Archer Aviation is currently generating about -0.14 per unit of risk. If you would invest  11,253  in Walt Disney on September 1, 2022 and sell it today you would lose (1,466)  from holding Walt Disney or give up 13.03% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Walt Disney  vs.  Archer Aviation

 Performance (%) 
       Timeline  
Walt Disney 
Disney Performance
0 of 100
Over the last 90 days Walt Disney has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile performance, the Stock's forward indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Disney Price Channel

Archer Aviation 
Archer Performance
0 of 100
Over the last 90 days Archer Aviation has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's technical indicators remain relatively invariable which may send shares a bit higher in December 2022. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Archer Price Channel

Disney and Archer Aviation Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Disney and Archer Aviation

The main advantage of trading using opposite Disney and Archer Aviation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney position performs unexpectedly, Archer Aviation 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 Archer Aviation will offset losses from the drop in Archer Aviation's long position.
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The idea behind Walt Disney and Archer Aviation 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 Watchlist Optimization module to optimize watchlists to build efficient portfolio or rebalance existing positions based on mean-variance optimization algorithm.

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