Pair Trade Idea: Discovery Communications (DISCK/DISCA) Share Class Arbitrage

Here's an idea: an arbitrage between the two classes of Discovery Communications stock (DISCK/DISCA).

The two classes of stock are economically equivalent, but the DISCK trades at a ~15% discount to the DISCA.

Here's a chart of the spread over the past two years. It seems to be "stuck" around the current level, although the company may be working to close the gap by targeting all of its buybacks on the class that trades at a discount.

Probably, the best way to make money on this type of situation would be to monitor the spread and step in with capital when the discount is extreme.

This type of trade is attractive because it is not really correlated with the market. Having trades in the portfolio with positive expected value and low correlations is beneficial.