Correlation Between Discover Financial and CAP LEASE

Can any of the company-specific risk be diversified away by investing in both Discover Financial and CAP LEASE 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 Discover Financial and CAP LEASE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Discover Financial Services and CAP LEASE AVIATION, you can compare the effects of market volatilities on Discover Financial and CAP LEASE 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 Discover Financial with a short position of CAP LEASE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and CAP LEASE.

Diversification Opportunities for Discover Financial and CAP LEASE

-0.82

Correlation Coefficient

Discover Financial  CAP LEASE

Pay attention - limited upside

The 3 months correlation between Discover and CAP is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and CAP LEASE AVIATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAP LEASE AVIATION and Discover Financial 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 Discover Financial Services are associated (or correlated) with CAP LEASE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAP LEASE AVIATION has no effect on the direction of Discover Financial i.e., Discover Financial and CAP LEASE go up and down completely randomly.

Pair Corralation between Discover Financial and CAP LEASE

Assuming the 90 days trading horizon Discover Financial Services is expected to generate 0.73 times more return on investment than CAP LEASE. However, Discover Financial Services is 1.37 times less risky than CAP LEASE. It trades about 0.06 of its potential returns per unit of risk. CAP LEASE AVIATION is currently generating about -0.03 per unit of risk. If you would invest  10,072  in Discover Financial Services on October 7, 2024 and sell it today you would earn a total of  7,381  from holding Discover Financial Services or generate 73.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

Discover Financial Services  vs.  CAP LEASE AVIATION

Discover Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Discover Financial Services are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Discover Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

CAP LEASE AVIATION

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CAP LEASE AVIATION has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Discover Financial and CAP LEASE

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

The idea behind Discover Financial Services and CAP LEASE AVIATION 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.

Check out your portfolio center.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.