Correlation Between American Express and Walt Disney

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

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

Diversification Opportunities for American Express and Walt Disney

0.45

Correlation Coefficient

American Express  Walt Disney

Very weak diversification

The 3 months correlation between American and Walt is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding American Express Co and Walt Disney in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walt Disney and American Express 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 American Express Co are associated (or correlated) with Walt 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 American Express i.e., American Express and Walt Disney go up and down completely randomly.

Pair Corralation between American Express and Walt Disney

Assuming the 90 days trading horizon American Express is expected to generate 10.38 times less return on investment than Walt Disney. In addition to that, American Express is 1.1 times more volatile than Walt Disney. It trades about 0.01 of its total potential returns per unit of risk. Walt Disney is currently generating about 0.09 per unit of volatility. If you would invest  946,000  in Walt Disney on September 13, 2024 and sell it today you would earn a total of  76,500  from holding Walt Disney or generate 8.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

American Express Co  vs.  Walt Disney

American Express

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Express Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, American Express 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

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Walt Disney may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with American Express and Walt Disney

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

The idea behind American Express Co 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.

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 the Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.