Correlation Between Disney and Dimensional ETF

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

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

Diversification Opportunities for Disney and Dimensional ETF

0.68

Correlation Coefficient

Disney  Dimensional ETF

Poor diversification

The 3 months correlation between Disney and Dimensional is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Dimensional ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional ETF Trust 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 Dimensional ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional ETF Trust has no effect on the direction of Disney i.e., Disney and Dimensional ETF go up and down completely randomly.

Pair Corralation between Disney and Dimensional ETF

Considering the 90-day investment horizon Walt Disney is expected to generate 1.78 times more return on investment than Dimensional ETF. However, Disney is 1.78 times more volatile than Dimensional ETF Trust. It trades about 0.3 of its potential returns per unit of risk. Dimensional ETF Trust is currently generating about 0.15 per unit of risk. If you would invest  9,038  in Walt Disney on August 30, 2024 and sell it today you would earn a total of  2,722  from holding Walt Disney or generate 30.12% 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.  Dimensional ETF Trust

Walt Disney

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting forward indicators, Disney unveiled solid returns over the last few months and may actually be approaching a breakup point.

Dimensional ETF Trust

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Dimensional ETF Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively weak basic indicators, Dimensional ETF may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Disney and Dimensional ETF

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

The idea behind Walt Disney and Dimensional ETF Trust 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.