Correlation Between Disney and International Business

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

Diversification Opportunities for Disney and International Business

-0.11
  Correlation Coefficient

Good diversification

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

Pair Corralation between Disney and International Business

Considering the 90-day investment horizon Walt Disney is expected to generate 1.67 times more return on investment than International Business. However, Disney is 1.67 times more volatile than International Business Machines. It trades about 0.12 of its potential returns per unit of risk. International Business Machines is currently generating about 0.08 per unit of risk. If you would invest  10,583  in Walt Disney on May 21, 2022 and sell it today you would earn a total of  1,684  from holding Walt Disney or generate 15.91% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Walt Disney  vs.  International Business Machine

 Performance (%) 
       Timeline  
Walt Disney 
Disney Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile forward indicators, Disney reported solid returns over the last few months and may actually be approaching a breakup point.

Disney Price Channel

International Business 
International Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting fundamental drivers, International Business may actually be approaching a critical reversion point that can send shares even higher in September 2022.

International Price Channel

Disney and International Business Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Disney and International Business

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

Walt Disney

Pair trading matchups for Disney

The idea behind Walt Disney and International Business Machines 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.

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