Correlation Between Discount Investment and Abra Information

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

By analyzing existing cross correlation between Discount Investment Corp and Abra Information Technologies, you can compare the effects of market volatilities on Discount Investment and Abra Information 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 Discount Investment with a short position of Abra Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discount Investment and Abra Information.

Diversification Opportunities for Discount Investment and Abra Information

0.21

Correlation Coefficient

Discount Investment  Abra Information

Modest diversification

The 3 months correlation between Discount and Abra is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Discount Investment Corp and Abra Information Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abra Information Tec and Discount Investment 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 Discount Investment Corp are associated (or correlated) with Abra Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abra Information Tec has no effect on the direction of Discount Investment i.e., Discount Investment and Abra Information go up and down completely randomly.

Pair Corralation between Discount Investment and Abra Information

Assuming the 90 days trading horizon Discount Investment Corp is expected to generate 1.94 times more return on investment than Abra Information. However, Discount Investment is 1.94 times more volatile than Abra Information Technologies. It trades about 0.05 of its potential returns per unit of risk. Abra Information Technologies is currently generating about 0.05 per unit of risk. If you would invest  43,250  in Discount Investment Corp on December 30, 2024 and sell it today you would earn a total of  2,750  from holding Discount Investment Corp or generate 6.36% return on investment over 90 days.

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

Discount Investment Corp  vs.  Abra Information Technologies

Discount Investment Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Discount Investment Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Discount Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

Abra Information Tec

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Abra Information Technologies are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Abra Information may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Discount Investment and Abra Information

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

The idea behind Discount Investment Corp and Abra Information Technologies 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.