Correlation Between Discovery Aggressive and Affinity

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

By analyzing existing cross correlation between Discovery Aggressive Dynamic and Affinity Ci Growth, you can compare the effects of market volatilities on Discovery Aggressive and Affinity 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 Discovery Aggressive with a short position of Affinity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discovery Aggressive and Affinity.

Diversification Opportunities for Discovery Aggressive and Affinity

0.77

Correlation Coefficient

Discovery Aggressive  Affinity

Poor diversification

The 3 months correlation between Discovery and Affinity is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Discovery Aggressive Dynamic and Affinity Ci Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Affinity Ci Growth and Discovery Aggressive 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 Discovery Aggressive Dynamic are associated (or correlated) with Affinity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Affinity Ci Growth has no effect on the direction of Discovery Aggressive i.e., Discovery Aggressive and Affinity go up and down completely randomly.

Pair Corralation between Discovery Aggressive and Affinity

Assuming the 90 days trading horizon Discovery Aggressive Dynamic is expected to under-perform the Affinity. But the fund apears to be less risky and, when comparing its historical volatility, Discovery Aggressive Dynamic is 1.01 times less risky than Affinity. The fund trades about -0.06 of its potential returns per unit of risk. The Affinity Ci Growth is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  135.00  in Affinity Ci Growth on December 25, 2024 and sell it today you would earn a total of  0.00  from holding Affinity Ci Growth or generate 0.0% return on investment over 90 days.

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

Discovery Aggressive Dynamic  vs.  Affinity Ci Growth

Discovery Aggressive

Risk-Adjusted Performance

Very Weak

Over the last 90 days Discovery Aggressive Dynamic has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong forward-looking signals, Discovery Aggressive is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Affinity Ci Growth

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Discovery Aggressive and Affinity

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

The idea behind Discovery Aggressive Dynamic and Affinity Ci Growth 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.