Correlation Between Discovery Balanced and Coronation Global

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

Diversification Opportunities for Discovery Balanced and Coronation Global

0.9

Correlation Coefficient

Discovery Balanced  Coronation Global

Almost no diversification

The 3 months correlation between Discovery and Coronation is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Discovery Balanced and Coronation Global Optimum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coronation Global Optimum 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 Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coronation Global Optimum has no effect on the direction of Discovery Balanced i.e., Discovery Balanced and Coronation Global go up and down completely randomly.

Pair Corralation between Discovery Balanced and Coronation Global

Assuming the 90 days trading horizon Discovery Balanced is expected to generate 1.48 times less return on investment than Coronation Global. But when comparing it to its historical volatility, Discovery Balanced is 1.78 times less risky than Coronation Global. It trades about 0.18 of its potential returns per unit of risk. Coronation Global Optimum is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  16,564  in Coronation Global Optimum on September 14, 2024 and sell it today you would earn a total of  1,458  from holding Coronation Global Optimum or generate 8.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.41%
Values	Daily Returns

Discovery Balanced  vs.  Coronation Global Optimum

Discovery Balanced

Risk-Adjusted Performance

14 of 100

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 Global Optimum

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Coronation Global Optimum are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Coronation Global may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Discovery Balanced and Coronation Global

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

The idea behind Discovery Balanced and Coronation Global Optimum 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.