Correlation Between Disney and Liberty Media

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

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

Diversification Opportunities for Disney and Liberty Media

-0.03

Correlation Coefficient

Disney  Liberty Media

Good diversification

The 3 months correlation between Disney and Liberty is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Liberty Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Media 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 Liberty Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Media has no effect on the direction of Disney i.e., Disney and Liberty Media go up and down completely randomly.

Pair Corralation between Disney and Liberty Media

Considering the 90-day investment horizon Walt Disney is expected to generate 0.95 times more return on investment than Liberty Media. However, Walt Disney is 1.05 times less risky than Liberty Media. It trades about -0.02 of its potential returns per unit of risk. Liberty Media is currently generating about -0.18 per unit of risk. If you would invest  10,929  in Walt Disney on February 11, 2024 and sell it today you would lose (350.00) from holding Walt Disney or give up 3.2% of portfolio value over 90 days.

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

Walt Disney  vs.  Liberty Media

Walt Disney

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Walt Disney has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, Disney is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Liberty Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Liberty Media has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's primary indicators remain quite persistent which may send shares a bit higher in June 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Disney and Liberty Media

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

The idea behind Walt Disney and Liberty Media 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.