Correlation Between Chevron Corp and Disney

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

Diversification Opportunities for Chevron Corp and Disney

0.48
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Chevron and Disney is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and Walt Disney in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walt Disney and Chevron Corp 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 Chevron Corp 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 Chevron Corp i.e., Chevron Corp and Disney go up and down completely randomly.

Pair Corralation between Chevron Corp and Disney

Considering the 90-day investment horizon Chevron Corp is expected to generate 2.27 times less return on investment than Disney. In addition to that, Chevron Corp is 1.12 times more volatile than Walt Disney. It trades about 0.22 of its total potential returns per unit of risk. Walt Disney is currently generating about 0.55 per unit of volatility. If you would invest  9,570  in Walt Disney on May 19, 2022 and sell it today you would earn a total of  2,926  from holding Walt Disney or generate 30.57% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Chevron Corp  vs.  Walt Disney

 Performance (%) 
       Timeline  
Chevron Corp 
Chevron Performance
0 of 100
Over the last 90 days Chevron Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Chevron Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Chevron Price Channel

Walt Disney 
Disney Performance
11 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward indicators, Disney reported solid returns over the last few months and may actually be approaching a breakup point.

Disney Price Channel

Chevron Corp and Disney Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Chevron Corp and Disney

The main advantage of trading using opposite Chevron Corp and Disney positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chevron Corp 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.
The idea behind Chevron Corp and Walt Disney 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.

Walt Disney

Pair trading matchups for Disney

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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