Correlation Between Discovery Balanced and Coronation Capital

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Can any of the company-specific risk be diversified away by investing in both Discovery Balanced and Coronation Capital 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 Discovery Balanced and Coronation Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Discovery Balanced and Coronation Capital Plus, you can compare the effects of market volatilities on Discovery Balanced and Coronation Capital 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 Discovery Balanced with a short position of Coronation Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discovery Balanced and Coronation Capital.

Diversification Opportunities for Discovery Balanced and Coronation Capital

0.91
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Discovery and Coronation is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Discovery Balanced and Coronation Capital Plus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coronation Capital Plus and Discovery Balanced 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 Discovery Balanced are associated (or correlated) with Coronation Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coronation Capital Plus has no effect on the direction of Discovery Balanced i.e., Discovery Balanced and Coronation Capital go up and down completely randomly.

Pair Corralation between Discovery Balanced and Coronation Capital

Assuming the 90 days trading horizon Discovery Balanced is expected to generate 1.07 times less return on investment than Coronation Capital. In addition to that, Discovery Balanced is 1.17 times more volatile than Coronation Capital Plus. It trades about 0.18 of its total potential returns per unit of risk. Coronation Capital Plus is currently generating about 0.23 per unit of volatility. If you would invest  5,421  in Coronation Capital Plus on September 15, 2024 and sell it today you would earn a total of  349.00  from holding Coronation Capital Plus or generate 6.44% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy98.41%
ValuesDaily Returns

Discovery Balanced  vs.  Coronation Capital Plus

 Performance 
       Timeline  
Discovery Balanced 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Discovery Balanced are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. Despite fairly strong basic indicators, Discovery Balanced is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.
Coronation Capital Plus 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Coronation Capital Plus are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. Despite fairly strong basic indicators, Coronation Capital is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Discovery Balanced and Coronation Capital Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Discovery Balanced and Coronation Capital

The main advantage of trading using opposite Discovery Balanced and Coronation Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discovery Balanced position performs unexpectedly, Coronation Capital 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 Coronation Capital will offset losses from the drop in Coronation Capital's long position.
The idea behind Discovery Balanced and Coronation Capital Plus 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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