Correlation Between Discount Investment and Tigi

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

Diversification Opportunities for Discount Investment and Tigi

-0.3

Correlation Coefficient

Discount Investment  Tigi

Very good diversification

The 3 months correlation between Discount and Tigi is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Discount Investment Corp and Tigi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tigi 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 Tigi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tigi has no effect on the direction of Discount Investment i.e., Discount Investment and Tigi go up and down completely randomly.

Pair Corralation between Discount Investment and Tigi

Assuming the 90 days trading horizon Discount Investment Corp is expected to under-perform the Tigi. But the stock apears to be less risky and, when comparing its historical volatility, Discount Investment Corp is 5.48 times less risky than Tigi. The stock trades about -0.3 of its potential returns per unit of risk. The Tigi is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  71,770  in Tigi on September 17, 2024 and sell it today you would earn a total of  7,010  from holding Tigi or generate 9.77% return on investment over 90 days.

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

Discount Investment Corp  vs.  Tigi

Discount Investment Corp

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Discount Investment Corp are ranked lower than 26 (%) 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.

Tigi

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tigi are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tigi sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Discount Investment and Tigi

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

The idea behind Discount Investment Corp and Tigi 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.