Correlation Between Wilson Bayly and Discovery Holdings

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

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

Diversification Opportunities for Wilson Bayly and Discovery Holdings

-0.15

Correlation Coefficient

Wilson Bayly  Discovery Holdings

Good diversification

The 3 months correlation between Wilson and Discovery is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Wilson Bayly Holmes and Discovery Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discovery Holdings and Wilson Bayly 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 Wilson Bayly Holmes are associated (or correlated) with Discovery Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Discovery Holdings has no effect on the direction of Wilson Bayly i.e., Wilson Bayly and Discovery Holdings go up and down completely randomly.

Pair Corralation between Wilson Bayly and Discovery Holdings

Assuming the 90 days trading horizon Wilson Bayly is expected to generate 1.55 times less return on investment than Discovery Holdings. In addition to that, Wilson Bayly is 3.08 times more volatile than Discovery Holdings. It trades about 0.01 of its total potential returns per unit of risk. Discovery Holdings is currently generating about 0.04 per unit of volatility. If you would invest  1,952,500  in Discovery Holdings on October 12, 2024 and sell it today you would earn a total of  12,900  from holding Discovery Holdings or generate 0.66% return on investment over 90 days.

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

Wilson Bayly Holmes  vs.  Discovery Holdings

Wilson Bayly Holmes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wilson Bayly Holmes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Wilson Bayly is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Discovery Holdings

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Discovery Holdings are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Discovery Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wilson Bayly and Discovery Holdings

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

The idea behind Wilson Bayly Holmes and Discovery 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.