Correlation Between SNDL and DISCOVERY

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

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

Diversification Opportunities for SNDL and DISCOVERY

-0.38

Correlation Coefficient

SNDL  DISCOVERY

Very good diversification

The 3 months correlation between SNDL and DISCOVERY is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding SNDL Inc and DISCOVERY MUNICATIONS LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DISCOVERY MUNICATIONS LLC and SNDL 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 SNDL Inc are associated (or correlated) with DISCOVERY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DISCOVERY MUNICATIONS LLC has no effect on the direction of SNDL i.e., SNDL and DISCOVERY go up and down completely randomly.

Pair Corralation between SNDL and DISCOVERY

Given the investment horizon of 90 days SNDL Inc is expected to under-perform the DISCOVERY. In addition to that, SNDL is 18.27 times more volatile than DISCOVERY MUNICATIONS LLC. It trades about -0.1 of its total potential returns per unit of risk. DISCOVERY MUNICATIONS LLC is currently generating about 0.02 per unit of volatility. If you would invest  9,972  in DISCOVERY MUNICATIONS LLC on December 4, 2024 and sell it today you would earn a total of  13.00  from holding DISCOVERY MUNICATIONS LLC or generate 0.13% return on investment over 90 days.

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

SNDL Inc  vs.  DISCOVERY MUNICATIONS LLC

SNDL Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days SNDL Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

DISCOVERY MUNICATIONS LLC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DISCOVERY MUNICATIONS LLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, DISCOVERY is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SNDL and DISCOVERY

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

The idea behind SNDL Inc and DISCOVERY MUNICATIONS LLC 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.