Correlation Between Disney and SSGA SP

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

Diversification Opportunities for Disney and SSGA SP

0.24
  Correlation Coefficient

Modest diversification

The 3 months correlation between Disney and SVSPX is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and SSGA SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSGA SP 500 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 SSGA SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSGA SP 500 has no effect on the direction of Disney i.e., Disney and SSGA SP go up and down completely randomly.

Pair Corralation between Disney and SSGA SP

Considering the 90-day investment horizon Walt Disney is expected to under-perform the SSGA SP. In addition to that, Disney is 1.62 times more volatile than SSGA SP 500. It trades about -0.05 of its total potential returns per unit of risk. SSGA SP 500 is currently generating about 0.02 per unit of volatility. If you would invest  20,613  in SSGA SP 500 on September 10, 2022 and sell it today you would earn a total of  2,079  from holding SSGA SP 500 or generate 10.09% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Walt Disney  vs.  SSGA SP 500

 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 sluggish performance in the last few months, the Stock's forward indicators remain relatively invariable which may send shares a bit higher in January 2023. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Disney Price Channel

SSGA SP 500 
SVSPX Performance
0 of 100
Over the last 90 days SSGA SP 500 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, SSGA SP is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

SVSPX Price Channel

Disney and SSGA SP Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Disney and SSGA SP

The main advantage of trading using opposite Disney and SSGA SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney position performs unexpectedly, SSGA SP 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 SSGA SP will offset losses from the drop in SSGA SP's long position.
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The idea behind Walt Disney and SSGA SP 500 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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