Correlation Between Discovery Holdings and Brait SE

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

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

Diversification Opportunities for Discovery Holdings and Brait SE

0.97

Correlation Coefficient

Discovery Holdings  Brait SE

Almost no diversification

The 3 months correlation between Discovery and Brait is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Discovery Holdings and Brait SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brait SE 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 Brait SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brait SE has no effect on the direction of Discovery Holdings i.e., Discovery Holdings and Brait SE go up and down completely randomly.

Pair Corralation between Discovery Holdings and Brait SE

Assuming the 90 days trading horizon Discovery Holdings is expected to generate 0.46 times more return on investment than Brait SE. However, Discovery Holdings is 2.19 times less risky than Brait SE. It trades about 0.07 of its potential returns per unit of risk. Brait SE is currently generating about -0.03 per unit of risk. If you would invest  1,227,065  in Discovery Holdings on September 23, 2024 and sell it today you would earn a total of  731,235  from holding Discovery Holdings or generate 59.59% 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.  Brait SE

Discovery Holdings

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Discovery Holdings are ranked lower than 22 (%) 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.

Brait SE

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brait SE are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Brait SE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Discovery Holdings and Brait SE

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

The idea behind Discovery Holdings and Brait SE 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.