Correlation Between Disney and Isabella Bank

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

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

Diversification Opportunities for Disney and Isabella Bank

-0.61

Correlation Coefficient

Disney  Isabella Bank

Excellent diversification

The 3 months correlation between Disney and Isabella is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Isabella Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Isabella Bank 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 Isabella Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Isabella Bank has no effect on the direction of Disney i.e., Disney and Isabella Bank go up and down completely randomly.

Pair Corralation between Disney and Isabella Bank

Considering the 90-day investment horizon Walt Disney is expected to under-perform the Isabella Bank. But the stock apears to be less risky and, when comparing its historical volatility, Walt Disney is 1.55 times less risky than Isabella Bank. The stock trades about -0.24 of its potential returns per unit of risk. The Isabella Bank is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  1,910  in Isabella Bank on February 3, 2024 and sell it today you would lose (83.00) from holding Isabella Bank or give up 4.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Walt Disney  vs.  Isabella Bank

Walt Disney

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 10 (%) 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.

Isabella Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Isabella Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Disney and Isabella Bank

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

The idea behind Walt Disney and Isabella Bank 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.