Correlation Between CS Disco and Dave

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

Diversification Opportunities for CS Disco and Dave

0.08

Correlation Coefficient

CS Disco  Dave

Significant diversification

The 3 months correlation between LAW and Dave is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding CS Disco LLC and Dave Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dave Inc 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 Dave. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dave Inc has no effect on the direction of CS Disco i.e., CS Disco and Dave go up and down completely randomly.

Pair Corralation between CS Disco and Dave

Considering the 90-day investment horizon CS Disco is expected to generate 6.87 times less return on investment than Dave. But when comparing it to its historical volatility, CS Disco LLC is 3.78 times less risky than Dave. It trades about 0.1 of its potential returns per unit of risk. Dave Inc is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  6,280  in Dave Inc on September 13, 2024 and sell it today you would earn a total of  2,319  from holding Dave Inc or generate 36.93% 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.  Dave Inc

CS Disco LLC

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CS Disco LLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, CS Disco may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Dave Inc

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dave Inc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Dave exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CS Disco and Dave

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

The idea behind CS Disco LLC and Dave Inc 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.