Correlation Between Disney and Ford

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

Diversification Opportunities for Disney and Ford

0.94
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Disney and Ford is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Ford Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ford Motor 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 Ford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ford Motor has no effect on the direction of Disney i.e., Disney and Ford go up and down completely randomly.

Pair Corralation between Disney and Ford

Considering the 90-day investment horizon Walt Disney is expected to generate 0.54 times more return on investment than Ford. However, Walt Disney is 1.87 times less risky than Ford. It trades about -0.37 of its potential returns per unit of risk. Ford Motor is currently generating about -0.32 per unit of risk. If you would invest  11,407  in Walt Disney on June 27, 2022 and sell it today you would lose (1,457)  from holding Walt Disney or give up 12.77% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Walt Disney  vs.  Ford Motor

 Performance (%) 
       Timeline  
Walt Disney 
Disney Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward indicators, Disney is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Disney Price Channel

Ford Motor 
Ford Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Ford is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Ford Price Channel

Disney and Ford Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Disney and Ford

The main advantage of trading using opposite Disney and Ford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney position performs unexpectedly, Ford 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 Ford will offset losses from the drop in Ford's long position.
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The idea behind Walt Disney and Ford Motor 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.

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