Correlation Between Disney and SEMPRA

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

By analyzing existing cross correlation between Walt Disney and SEMPRA ENERGY 325, you can compare the effects of market volatilities on Disney and SEMPRA 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 SEMPRA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and SEMPRA.

Diversification Opportunities for Disney and SEMPRA

-0.62

Correlation Coefficient

Disney  SEMPRA

Excellent diversification

The 3 months correlation between Disney and SEMPRA is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and SEMPRA ENERGY 325 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEMPRA ENERGY 325 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 SEMPRA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEMPRA ENERGY 325 has no effect on the direction of Disney i.e., Disney and SEMPRA go up and down completely randomly.

Pair Corralation between Disney and SEMPRA

Considering the 90-day investment horizon Walt Disney is expected to generate 3.21 times more return on investment than SEMPRA. However, Disney is 3.21 times more volatile than SEMPRA ENERGY 325. It trades about 0.09 of its potential returns per unit of risk. SEMPRA ENERGY 325 is currently generating about -0.04 per unit of risk. If you would invest  9,951  in Walt Disney on September 12, 2024 and sell it today you would earn a total of  1,522  from holding Walt Disney or generate 15.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	86.4%
Values	Daily Returns

Walt Disney  vs.  SEMPRA ENERGY 325

Walt Disney

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward indicators, Disney unveiled solid returns over the last few months and may actually be approaching a breakup point.

SEMPRA ENERGY 325

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SEMPRA ENERGY 325 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SEMPRA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Disney and SEMPRA

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

The idea behind Walt Disney and SEMPRA ENERGY 325 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.