Correlation Between Disney and Equitrans Midstream

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

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

Diversification Opportunities for Disney and Equitrans Midstream

-0.39

Correlation Coefficient

Disney  Equitrans Midstream

Very good diversification

The 3 months correlation between Disney and Equitrans is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Equitrans Midstream Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equitrans Midstream Corp 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 Equitrans Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equitrans Midstream Corp has no effect on the direction of Disney i.e., Disney and Equitrans Midstream go up and down completely randomly.

Pair Corralation between Disney and Equitrans Midstream

Considering the 90-day investment horizon Disney is expected to generate 1.66 times less return on investment than Equitrans Midstream. In addition to that, Disney is 1.09 times more volatile than Equitrans Midstream Corp. It trades about 0.07 of its total potential returns per unit of risk. Equitrans Midstream Corp is currently generating about 0.12 per unit of volatility. If you would invest  957.00  in Equitrans Midstream Corp on September 4, 2024 and sell it today you would earn a total of  285.00  from holding Equitrans Midstream Corp or generate 29.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	61.94%
Values	Daily Returns

Walt Disney  vs.  Equitrans Midstream Corp

Walt Disney

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 24 (%) 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.

Equitrans Midstream Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equitrans Midstream Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Equitrans Midstream is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Disney and Equitrans Midstream

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

The idea behind Walt Disney and Equitrans Midstream Corp 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.