Correlation Between CS Disco and Sprout Social

Can any of the company-specific risk be diversified away by investing in both CS Disco and Sprout Social 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 CS Disco and Sprout Social into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CS Disco LLC and Sprout Social, you can compare the effects of market volatilities on CS Disco and Sprout Social 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 CS Disco with a short position of Sprout Social. Check out your portfolio center. Please also check ongoing floating volatility patterns of CS Disco and Sprout Social.

Diversification Opportunities for CS Disco and Sprout Social

-0.42

Correlation Coefficient

CS Disco  Sprout Social

Very good diversification

The 3 months correlation between LAW and Sprout is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding CS Disco LLC and Sprout Social in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprout Social and CS Disco 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 CS Disco LLC are associated (or correlated) with Sprout Social. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprout Social has no effect on the direction of CS Disco i.e., CS Disco and Sprout Social go up and down completely randomly.

Pair Corralation between CS Disco and Sprout Social

Considering the 90-day investment horizon CS Disco LLC is expected to generate 0.67 times more return on investment than Sprout Social. However, CS Disco LLC is 1.48 times less risky than Sprout Social. It trades about 0.12 of its potential returns per unit of risk. Sprout Social is currently generating about -0.06 per unit of risk. If you would invest  513.00  in CS Disco LLC on August 11, 2024 and sell it today you would earn a total of  80.00  from holding CS Disco LLC or generate 15.59% return on investment over 90 days.

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

CS Disco LLC  vs.  Sprout Social

CS Disco LLC

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CS Disco LLC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, CS Disco showed solid returns over the last few months and may actually be approaching a breakup point.

Sprout Social

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sprout Social has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with CS Disco and Sprout Social

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

The idea behind CS Disco LLC and Sprout Social 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.