Correlation Between Discovery Aggressive and NewFunds Low

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

By analyzing existing cross correlation between Discovery Aggressive Dynamic and NewFunds Low Volatility, you can compare the effects of market volatilities on Discovery Aggressive and NewFunds Low 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 Aggressive with a short position of NewFunds Low. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discovery Aggressive and NewFunds Low.

Diversification Opportunities for Discovery Aggressive and NewFunds Low

0.58

Correlation Coefficient

Discovery Aggressive  NewFunds Low

Very weak diversification

The 3 months correlation between Discovery and NewFunds is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Discovery Aggressive Dynamic and NewFunds Low Volatility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NewFunds Low Volatility and Discovery Aggressive 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 Aggressive Dynamic are associated (or correlated) with NewFunds Low. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NewFunds Low Volatility has no effect on the direction of Discovery Aggressive i.e., Discovery Aggressive and NewFunds Low go up and down completely randomly.

Pair Corralation between Discovery Aggressive and NewFunds Low

Assuming the 90 days trading horizon Discovery Aggressive is expected to generate 1.08 times less return on investment than NewFunds Low. But when comparing it to its historical volatility, Discovery Aggressive Dynamic is 1.22 times less risky than NewFunds Low. It trades about 0.14 of its potential returns per unit of risk. NewFunds Low Volatility is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  120,600  in NewFunds Low Volatility on September 14, 2024 and sell it today you would earn a total of  5,800  from holding NewFunds Low Volatility or generate 4.81% return on investment over 90 days.

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

Discovery Aggressive Dynamic  vs.  NewFunds Low Volatility

Discovery Aggressive

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Discovery Aggressive Dynamic are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong forward-looking signals, Discovery Aggressive is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

NewFunds Low Volatility

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NewFunds Low Volatility are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, NewFunds Low is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Discovery Aggressive and NewFunds Low

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

The idea behind Discovery Aggressive Dynamic and NewFunds Low Volatility 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.