Correlation Between Discount Investment and Alrov Properties

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

By analyzing existing cross correlation between Discount Investment Corp and Alrov Properties Lodgings, you can compare the effects of market volatilities on Discount Investment and Alrov Properties 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 Discount Investment with a short position of Alrov Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discount Investment and Alrov Properties.

Diversification Opportunities for Discount Investment and Alrov Properties

0.76

Correlation Coefficient

Discount Investment  Alrov Properties

Poor diversification

The 3 months correlation between Discount and Alrov is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Discount Investment Corp and Alrov Properties Lodgings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alrov Properties Lodgings and Discount Investment 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 Discount Investment Corp are associated (or correlated) with Alrov Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alrov Properties Lodgings has no effect on the direction of Discount Investment i.e., Discount Investment and Alrov Properties go up and down completely randomly.

Pair Corralation between Discount Investment and Alrov Properties

Assuming the 90 days trading horizon Discount Investment Corp is expected to generate 1.68 times more return on investment than Alrov Properties. However, Discount Investment is 1.68 times more volatile than Alrov Properties Lodgings. It trades about 0.31 of its potential returns per unit of risk. Alrov Properties Lodgings is currently generating about 0.47 per unit of risk. If you would invest  32,630  in Discount Investment Corp on September 13, 2024 and sell it today you would earn a total of  13,700  from holding Discount Investment Corp or generate 41.99% return on investment over 90 days.

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

Discount Investment Corp  vs.  Alrov Properties Lodgings

Discount Investment Corp

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Discount Investment Corp are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Discount Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

Alrov Properties Lodgings

Risk-Adjusted Performance

37 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Alrov Properties Lodgings are ranked lower than 37 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Alrov Properties unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Discount Investment and Alrov Properties

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

The idea behind Discount Investment Corp and Alrov Properties Lodgings 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.