Correlation Between Disney and Dicks Sporting

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

Diversification Opportunities for Disney and Dicks Sporting

0.23
  Correlation Coefficient

Modest diversification

The 3 months correlation between Disney and Dicks is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Dicks Sporting Goods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dicks Sporting Goods 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 Dicks Sporting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dicks Sporting Goods has no effect on the direction of Disney i.e., Disney and Dicks Sporting go up and down completely randomly.

Pair Corralation between Disney and Dicks Sporting

Considering the 90-day investment horizon Walt Disney is expected to under-perform the Dicks Sporting. But the stock apears to be less risky and, when comparing its historical volatility, Walt Disney is 1.11 times less risky than Dicks Sporting. The stock trades about -0.06 of its potential returns per unit of risk. The Dicks Sporting Goods is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  11,623  in Dicks Sporting Goods on August 29, 2022 and sell it today you would earn a total of  546.00  from holding Dicks Sporting Goods or generate 4.7% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Walt Disney  vs.  Dicks Sporting Goods

 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 latest weak performance, the Stock's forward indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Disney Price Channel

Dicks Sporting Goods 
Dicks Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Dicks Sporting Goods are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively sluggish forward-looking signals, Dicks Sporting reported solid returns over the last few months and may actually be approaching a breakup point.

Dicks Price Channel

Disney and Dicks Sporting Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Disney and Dicks Sporting

The main advantage of trading using opposite Disney and Dicks Sporting positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney position performs unexpectedly, Dicks Sporting 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 Dicks Sporting will offset losses from the drop in Dicks Sporting's long position.
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The idea behind Walt Disney and Dicks Sporting Goods 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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