Correlation Between Disney and Big 5

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Can any of the company-specific risk be diversified away by investing in both Disney and Big 5 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 Big 5 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walt Disney and Big 5 Sporting, you can compare the effects of market volatilities on Disney and Big 5 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 Big 5. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and Big 5.

Diversification Opportunities for Disney and Big 5

0.11
  Correlation Coefficient

Average diversification

The 3 months correlation between Disney and Big 5 is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Big 5 Sporting in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big 5 Sporting 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 Big 5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big 5 Sporting has no effect on the direction of Disney i.e., Disney and Big 5 go up and down completely randomly.

Pair Corralation between Disney and Big 5

Considering the 90-day investment horizon Walt Disney is expected to under-perform the Big 5. But the stock apears to be less risky and, when comparing its historical volatility, Walt Disney is 2.41 times less risky than Big 5. The stock trades about -0.06 of its potential returns per unit of risk. The Big 5 Sporting is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,053  in Big 5 Sporting on September 1, 2022 and sell it today you would earn a total of  194.00  from holding Big 5 Sporting or generate 18.42% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Walt Disney  vs.  Big 5 Sporting

 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 fragile performance in the last few months, the Stock's forward 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.

Disney Price Channel

Big 5 Sporting 
Big 5 Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Big 5 Sporting are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable technical and fundamental indicators, Big 5 is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Big 5 Price Channel

Disney and Big 5 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Disney and Big 5

The main advantage of trading using opposite Disney and Big 5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney position performs unexpectedly, Big 5 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 Big 5 will offset losses from the drop in Big 5's long position.
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The idea behind Walt Disney and Big 5 Sporting 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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