Correlation Between CS Disco and Karooooo

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

Diversification Opportunities for CS Disco and Karooooo

0.79

Correlation Coefficient

CS Disco  Karooooo

Poor diversification

The 3 months correlation between LAW and Karooooo is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding CS Disco LLC and Karooooo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Karooooo 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 Karooooo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Karooooo has no effect on the direction of CS Disco i.e., CS Disco and Karooooo go up and down completely randomly.

Pair Corralation between CS Disco and Karooooo

Considering the 90-day investment horizon CS Disco LLC is expected to under-perform the Karooooo. But the stock apears to be less risky and, when comparing its historical volatility, CS Disco LLC is 1.0 times less risky than Karooooo. The stock trades about -0.08 of its potential returns per unit of risk. The Karooooo is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  4,585  in Karooooo on December 27, 2024 and sell it today you would lose (281.00) from holding Karooooo or give up 6.13% of portfolio value over 90 days.

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

CS Disco LLC  vs.  Karooooo

CS Disco LLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days CS Disco LLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Karooooo

Risk-Adjusted Performance

Very Weak

Over the last 90 days Karooooo has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Karooooo is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with CS Disco and Karooooo

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

The idea behind CS Disco LLC and Karooooo 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.