Correlation Between Discovery Holdings and Aveng

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

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

Diversification Opportunities for Discovery Holdings and Aveng

0.91

Correlation Coefficient

Discovery Holdings  Aveng

Almost no diversification

The 3 months correlation between Discovery and Aveng is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Discovery Holdings and Aveng in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aveng and Discovery Holdings 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 Holdings are associated (or correlated) with Aveng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aveng has no effect on the direction of Discovery Holdings i.e., Discovery Holdings and Aveng go up and down completely randomly.

Pair Corralation between Discovery Holdings and Aveng

Assuming the 90 days trading horizon Discovery Holdings is expected to generate 1.24 times less return on investment than Aveng. But when comparing it to its historical volatility, Discovery Holdings is 1.64 times less risky than Aveng. It trades about 0.2 of its potential returns per unit of risk. Aveng is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  62,400  in Aveng on September 24, 2024 and sell it today you would earn a total of  53,400  from holding Aveng or generate 85.58% return on investment over 90 days.

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

Discovery Holdings  vs.  Aveng

Discovery Holdings

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Discovery Holdings are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Discovery Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Aveng

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aveng are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Aveng exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Discovery Holdings and Aveng

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

The idea behind Discovery Holdings and Aveng 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 Stocks Directory module to find actively traded stocks across global markets.