Correlation Between Disney and B of A

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

Diversification Opportunities for Disney and B of A

0.91
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Disney and B of A is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Bank Of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Of America 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 B of A. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Of America has no effect on the direction of Disney i.e., Disney and B of A go up and down completely randomly.

Pair Corralation between Disney and B of A

Considering the 90-day investment horizon Walt Disney is expected to generate 1.03 times more return on investment than B of A. However, Disney is 1.03 times more volatile than Bank Of America. It trades about 0.05 of its potential returns per unit of risk. Bank Of America is currently generating about -0.01 per unit of risk. If you would invest  10,330  in Walt Disney on May 10, 2022 and sell it today you would earn a total of  333.00  from holding Walt Disney or generate 3.22% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Walt Disney  vs.  Bank Of America

 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 relatively invariable forward indicators, Disney is not utilizing all of its potentials. The new stock price agitation, may contribute to short-term losses for the retail investors.

Disney Price Channel

Bank Of America 
B of A Performance
0 of 100
Over the last 90 days Bank Of America has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, B of A is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

B of A Price Channel

Disney and B of A Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Disney and B of A

The main advantage of trading using opposite Disney and B of A positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney position performs unexpectedly, B of A 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 B of A will offset losses from the drop in B of A's long position.
The idea behind Walt Disney and Bank Of America 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.
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 Anywhere module to track or share privately all of your investments from the convenience of any device.

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