Correlation Between Disney and WisdomTree Japan

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

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

Diversification Opportunities for Disney and WisdomTree Japan

0.66

Correlation Coefficient

Disney  WisdomTree Japan

Poor diversification

The 3 months correlation between Disney and WisdomTree is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and WisdomTree Japan Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Japan Hedged 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 WisdomTree Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Japan Hedged has no effect on the direction of Disney i.e., Disney and WisdomTree Japan go up and down completely randomly.

Pair Corralation between Disney and WisdomTree Japan

Considering the 90-day investment horizon Walt Disney is expected to under-perform the WisdomTree Japan. But the stock apears to be less risky and, when comparing its historical volatility, Walt Disney is 1.36 times less risky than WisdomTree Japan. The stock trades about -0.3 of its potential returns per unit of risk. The WisdomTree Japan Hedged is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  11,512  in WisdomTree Japan Hedged on May 4, 2025 and sell it today you would earn a total of  242.00  from holding WisdomTree Japan Hedged or generate 2.1% 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.  WisdomTree Japan Hedged

Walt Disney

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 17 (%) 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.

WisdomTree Japan Hedged

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Japan Hedged are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively sluggish basic indicators, WisdomTree Japan may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Disney and WisdomTree Japan

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

The idea behind Walt Disney and WisdomTree Japan Hedged 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.