Correlation Between Disney and VANGUARD 500

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Can any of the company-specific risk be diversified away by investing in both Disney and VANGUARD 500 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 VANGUARD 500 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walt Disney and VANGUARD 500 INDEX, you can compare the effects of market volatilities on Disney and VANGUARD 500 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 VANGUARD 500. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and VANGUARD 500.

Diversification Opportunities for Disney and VANGUARD 500

0.35
  Correlation Coefficient

Weak diversification

The 3 months correlation between Disney and VANGUARD is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and VANGUARD 500 INDEX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VANGUARD 500 INDEX 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 VANGUARD 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VANGUARD 500 INDEX has no effect on the direction of Disney i.e., Disney and VANGUARD 500 go up and down completely randomly.

Pair Corralation between Disney and VANGUARD 500

Considering the 90-day investment horizon Walt Disney is expected to under-perform the VANGUARD 500. In addition to that, Disney is 1.7 times more volatile than VANGUARD 500 INDEX. It trades about -0.04 of its total potential returns per unit of risk. VANGUARD 500 INDEX is currently generating about 0.05 per unit of volatility. If you would invest  36,020  in VANGUARD 500 INDEX on September 5, 2022 and sell it today you would earn a total of  1,668  from holding VANGUARD 500 INDEX or generate 4.63% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy98.46%
ValuesDaily Returns

Walt Disney  vs.  VANGUARD 500 INDEX

 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

VANGUARD 500 INDEX 
VANGUARD Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in VANGUARD 500 INDEX are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, VANGUARD 500 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

VANGUARD Price Channel

Disney and VANGUARD 500 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Disney and VANGUARD 500

The main advantage of trading using opposite Disney and VANGUARD 500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney position performs unexpectedly, VANGUARD 500 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 VANGUARD 500 will offset losses from the drop in VANGUARD 500's long position.
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The idea behind Walt Disney and VANGUARD 500 INDEX 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 Commodity Channel Index module to use Commodity Channel Index to analyze current equity momentum.

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