Correlation Between Infineon Technologies and Discover Financial

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

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

Diversification Opportunities for Infineon Technologies and Discover Financial

0.3

Correlation Coefficient

Infineon Technologies  Discover Financial

Weak diversification

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

Pair Corralation between Infineon Technologies and Discover Financial

Assuming the 90 days trading horizon Infineon Technologies AG is expected to generate 0.96 times more return on investment than Discover Financial. However, Infineon Technologies AG is 1.04 times less risky than Discover Financial. It trades about 0.07 of its potential returns per unit of risk. Discover Financial Services is currently generating about -0.01 per unit of risk. If you would invest  3,151  in Infineon Technologies AG on December 26, 2024 and sell it today you would earn a total of  304.00  from holding Infineon Technologies AG or generate 9.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.16%
Values	Daily Returns

Infineon Technologies AG  vs.  Discover Financial Services

Infineon Technologies

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Infineon Technologies AG are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Infineon Technologies may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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.

Pair Trading with Infineon Technologies and Discover Financial

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

The idea behind Infineon Technologies AG and Discover Financial Services 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.