Correlation Between Discovery Holdings and Compagnie Financire

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

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

Diversification Opportunities for Discovery Holdings and Compagnie Financire

0.0

Correlation Coefficient

Discovery Holdings  Compagnie Financire

Pay attention - limited upside

The 3 months correlation between Discovery and Compagnie is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Discovery Holdings and Compagnie Financire Richemont in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie Financire 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 Compagnie Financire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie Financire has no effect on the direction of Discovery Holdings i.e., Discovery Holdings and Compagnie Financire go up and down completely randomly.

Pair Corralation between Discovery Holdings and Compagnie Financire

Assuming the 90 days trading horizon Discovery Holdings is expected to generate 0.64 times more return on investment than Compagnie Financire. However, Discovery Holdings is 1.56 times less risky than Compagnie Financire. It trades about 0.27 of its potential returns per unit of risk. Compagnie Financire Richemont is currently generating about 0.01 per unit of risk. If you would invest  1,388,038  in Discovery Holdings on September 27, 2024 and sell it today you would earn a total of  592,962  from holding Discovery Holdings or generate 42.72% return on investment over 90 days.

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

Discovery Holdings  vs.  Compagnie Financire Richemont

Discovery Holdings

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Discovery Holdings 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, Discovery Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Compagnie Financire

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie Financire Richemont are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Compagnie Financire is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Discovery Holdings and Compagnie Financire

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

The idea behind Discovery Holdings and Compagnie Financire Richemont 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.