Correlation Between Discover Financial and One Media

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

Diversification Opportunities for Discover Financial and One Media

0.49

Correlation Coefficient

Discover Financial  One Media

Very weak diversification

The 3 months correlation between Discover and One is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and One Media iP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on One Media iP 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 One Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of One Media iP has no effect on the direction of Discover Financial i.e., Discover Financial and One Media go up and down completely randomly.

Pair Corralation between Discover Financial and One Media

Assuming the 90 days trading horizon Discover Financial Services is expected to under-perform the One Media. In addition to that, Discover Financial is 2.03 times more volatile than One Media iP. It trades about -0.03 of its total potential returns per unit of risk. One Media iP is currently generating about -0.02 per unit of volatility. If you would invest  425.00  in One Media iP on December 30, 2024 and sell it today you would lose (10.00) from holding One Media iP or give up 2.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.38%
Values	Daily Returns

Discover Financial Services  vs.  One Media iP

Discover Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Discover Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Discover Financial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

One Media iP

Risk-Adjusted Performance

Very Weak

Over the last 90 days One Media iP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, One Media is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Discover Financial and One Media

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

The idea behind Discover Financial Services and One Media iP 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.