Correlation Between CS Disco and Affirm Holdings

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

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

Diversification Opportunities for CS Disco and Affirm Holdings

0.13

Correlation Coefficient

CS Disco  Affirm Holdings

Average diversification

The 3 months correlation between LAW and Affirm is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding CS Disco LLC and Affirm Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Affirm Holdings and CS Disco 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 CS Disco LLC are associated (or correlated) with Affirm Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Affirm Holdings has no effect on the direction of CS Disco i.e., CS Disco and Affirm Holdings go up and down completely randomly.

Pair Corralation between CS Disco and Affirm Holdings

Considering the 90-day investment horizon CS Disco is expected to generate 11.47 times less return on investment than Affirm Holdings. But when comparing it to its historical volatility, CS Disco LLC is 2.19 times less risky than Affirm Holdings. It trades about 0.03 of its potential returns per unit of risk. Affirm Holdings is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  4,406  in Affirm Holdings on September 15, 2024 and sell it today you would earn a total of  2,471  from holding Affirm Holdings or generate 56.08% return on investment over 90 days.

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

CS Disco LLC  vs.  Affirm Holdings

CS Disco LLC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CS Disco LLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, CS Disco is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Affirm Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Affirm Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Affirm Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CS Disco and Affirm Holdings

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

The idea behind CS Disco LLC and Affirm Holdings 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.