Correlation Between Discount Investment and Feat Fund

Can any of the company-specific risk be diversified away by investing in both Discount Investment and Feat Fund 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 Feat Fund 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 Feat Fund Investments, you can compare the effects of market volatilities on Discount Investment and Feat Fund 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 Feat Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discount Investment and Feat Fund.

Diversification Opportunities for Discount Investment and Feat Fund

-0.06

Correlation Coefficient

Discount Investment  Feat Fund

Good diversification

The 3 months correlation between Discount and Feat is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Discount Investment Corp and Feat Fund Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Feat Fund Investments 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 Feat Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Feat Fund Investments has no effect on the direction of Discount Investment i.e., Discount Investment and Feat Fund go up and down completely randomly.

Pair Corralation between Discount Investment and Feat Fund

Assuming the 90 days trading horizon Discount Investment Corp is expected to under-perform the Feat Fund. But the stock apears to be less risky and, when comparing its historical volatility, Discount Investment Corp is 1.75 times less risky than Feat Fund. The stock trades about -0.4 of its potential returns per unit of risk. The Feat Fund Investments is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest  12,650  in Feat Fund Investments on October 7, 2024 and sell it today you would earn a total of  1,960  from holding Feat Fund Investments or generate 15.49% return on investment over 90 days.

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

Discount Investment Corp  vs.  Feat Fund Investments

Discount Investment Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Discount Investment Corp are ranked lower than 12 (%) 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.

Feat Fund Investments

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Feat Fund Investments are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Feat Fund sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Discount Investment and Feat Fund

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

The idea behind Discount Investment Corp and Feat Fund Investments 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.