Correlation Between SPDR SP and Disney

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

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

Diversification Opportunities for SPDR SP and Disney

0.61

Correlation Coefficient

SPDR SP  Disney

Poor diversification

The 3 months correlation between SPDR and Disney is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Semiconductor and Walt Disney in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walt Disney and SPDR SP 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 SPDR SP Semiconductor 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 SPDR SP i.e., SPDR SP and Disney go up and down completely randomly.

Pair Corralation between SPDR SP and Disney

Considering the 90-day investment horizon SPDR SP Semiconductor is expected to under-perform the Disney. In addition to that, SPDR SP is 1.36 times more volatile than Walt Disney. It trades about -0.14 of its total potential returns per unit of risk. Walt Disney is currently generating about -0.12 per unit of volatility. If you would invest  11,646  in Walt Disney on January 20, 2024 and sell it today you would lose (403.00) from holding Walt Disney or give up 3.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

SPDR SP Semiconductor  vs.  Walt Disney

SPDR SP Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR SP Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, SPDR SP is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Walt Disney

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 11 (%) 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.

Pair Trading with SPDR SP and Disney

The main advantage of trading using opposite SPDR SP and Disney positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP 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 SPDR SP Semiconductor 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.