Correlation Between Disney and Oakmark International

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

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

Diversification Opportunities for Disney and Oakmark International

0.62

Correlation Coefficient

Disney  Oakmark International

Poor diversification

The 3 months correlation between Disney and Oakmark is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Oakmark International Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oakmark International 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 Oakmark International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oakmark International has no effect on the direction of Disney i.e., Disney and Oakmark International go up and down completely randomly.

Pair Corralation between Disney and Oakmark International

Considering the 90-day investment horizon Disney is expected to generate 2.18 times less return on investment than Oakmark International. In addition to that, Disney is 1.63 times more volatile than Oakmark International Small. It trades about 0.01 of its total potential returns per unit of risk. Oakmark International Small is currently generating about 0.04 per unit of volatility. If you would invest  1,562  in Oakmark International Small on January 25, 2024 and sell it today you would earn a total of  364.00  from holding Oakmark International Small or generate 23.3% return on investment over 90 days.

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

Walt Disney  vs.  Oakmark International Small

Walt Disney

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, Disney unveiled solid returns over the last few months and may actually be approaching a breakup point.

Oakmark International

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Disney and Oakmark International

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

The idea behind Walt Disney and Oakmark International Small 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.