Correlation Between Disney and Chevron Corp

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

Diversification Opportunities for Disney and Chevron Corp

0.48
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Disney and Chevron is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Chevron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron Corp 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 Chevron Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chevron Corp has no effect on the direction of Disney i.e., Disney and Chevron Corp go up and down completely randomly.

Pair Corralation between Disney and Chevron Corp

Considering the 90-day investment horizon Disney is expected to generate 29.52 times less return on investment than Chevron Corp. In addition to that, Disney is 1.0 times more volatile than Chevron Corp. It trades about 0.0 of its total potential returns per unit of risk. Chevron Corp is currently generating about 0.08 per unit of volatility. If you would invest  7,804  in Chevron Corp on May 19, 2022 and sell it today you would earn a total of  7,837  from holding Chevron Corp or generate 100.42% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Walt Disney  vs.  Chevron Corp

 Performance (%) 
       Timeline  
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 
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

Disney and Chevron Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Disney and Chevron Corp

The main advantage of trading using opposite Disney and Chevron Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney position performs unexpectedly, Chevron Corp 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 Chevron Corp will offset losses from the drop in Chevron Corp's long position.

Walt Disney

Pair trading matchups for Disney

The idea behind Walt Disney and Chevron Corp 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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