Correlation Between Disney and Salesforce

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

Diversification Opportunities for Disney and Salesforce

0.3
  Correlation Coefficient

Weak diversification

The 3 months correlation between Disney and Salesforce is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Salesforce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salesforce 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 Salesforce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salesforce has no effect on the direction of Disney i.e., Disney and Salesforce go up and down completely randomly.

Pair Corralation between Disney and Salesforce

Considering the 90-day investment horizon Walt Disney is expected to under-perform the Salesforce. But the stock apears to be less risky and, when comparing its historical volatility, Walt Disney is 1.06 times less risky than Salesforce. The stock trades about -0.32 of its potential returns per unit of risk. The Salesforce is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  15,612  in Salesforce on July 2, 2022 and sell it today you would lose (931.00)  from holding Salesforce or give up 5.96% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Walt Disney  vs.  Salesforce

 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 latest stock price agitation, may contribute to short-term losses for the retail investors.

Disney Price Channel

Salesforce 
Salesforce Performance
0 of 100
Over the last 90 days Salesforce has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively steady which may send shares a bit higher in October 2022. The new chaos may also be a sign of medium-term up-swing for the company stakeholders.

Salesforce Price Channel

Disney and Salesforce Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Disney and Salesforce

The main advantage of trading using opposite Disney and Salesforce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney position performs unexpectedly, Salesforce 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 Salesforce will offset losses from the drop in Salesforce's long position.
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The idea behind Walt Disney and Salesforce 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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