Correlation Between Small Cap and Disney

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

Diversification Opportunities for Small Cap and Disney

  Correlation Coefficient

Average diversification

The 3 months correlation between Small and Disney is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Core and Walt Disney in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walt Disney and Small Cap 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 Small Cap Core 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 Small Cap i.e., Small Cap and Disney go up and down completely randomly.

Pair Corralation between Small Cap and Disney

Assuming the 90 days horizon Small Cap Core is expected to generate 0.66 times more return on investment than Disney. However, Small Cap Core is 1.51 times less risky than Disney. It trades about 0.04 of its potential returns per unit of risk. Walt Disney is currently generating about 0.02 per unit of risk. If you would invest  1,011  in Small Cap Core on March 27, 2024 and sell it today you would earn a total of  255.00  from holding Small Cap Core or generate 25.22% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
ValuesDaily Returns

Small Cap Core  vs.  Walt Disney

Small Cap Core 

Risk-Adjusted Performance

0 of 100

Very Weak
Over the last 90 days Small Cap Core has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Small Cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Walt Disney 

Risk-Adjusted Performance

0 of 100

Very Weak
Over the last 90 days Walt Disney has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's forward indicators remain comparatively stable which may send shares a bit higher in July 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Small Cap and Disney Volatility Contrast

   Predicted Return Density   

Pair Trading with Small Cap and Disney

The main advantage of trading using opposite Small Cap and Disney positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap 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 Small Cap Core 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.

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