Correlation Between Avantis International and Disney

Can any of the company-specific risk be diversified away by investing in both Avantis International and Disney 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 Avantis International and Disney into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Avantis International Small and Walt Disney, you can compare the effects of market volatilities on Avantis International and Disney 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 Avantis International with a short position of Disney. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avantis International and Disney.

Diversification Opportunities for Avantis International and Disney

0.79

Correlation Coefficient

Avantis International  Disney

Poor diversification

The 3 months correlation between Avantis and Disney is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Avantis International Small and Walt Disney in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walt Disney and Avantis International 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 Avantis International Small are associated (or correlated) with Disney. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walt Disney has no effect on the direction of Avantis International i.e., Avantis International and Disney go up and down completely randomly.

Pair Corralation between Avantis International and Disney

Assuming the 90 days horizon Avantis International Small is expected to generate 0.56 times more return on investment than Disney. However, Avantis International Small is 1.79 times less risky than Disney. It trades about 0.04 of its potential returns per unit of risk. Walt Disney is currently generating about 0.01 per unit of risk. If you would invest  1,029  in Avantis International Small on January 16, 2024 and sell it today you would earn a total of  195.00  from holding Avantis International Small or generate 18.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Avantis International Small  vs.  Walt Disney

Avantis International

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Avantis International Small are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Avantis International may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Walt Disney

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward indicators, Disney unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Avantis International and Disney

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

The idea behind Avantis International Small and Walt Disney 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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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 the Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.