Correlation Between Axway Software and Discover Financial

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

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

Diversification Opportunities for Axway Software and Discover Financial

0.88

Correlation Coefficient

Axway Software  Discover Financial

Very poor diversification

The 3 months correlation between Axway and Discover is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Axway Software SA and Discover Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discover Financial and Axway Software 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 Axway Software SA 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 Axway Software i.e., Axway Software and Discover Financial go up and down completely randomly.

Pair Corralation between Axway Software and Discover Financial

Assuming the 90 days trading horizon Axway Software SA is expected to generate 2.76 times more return on investment than Discover Financial. However, Axway Software is 2.76 times more volatile than Discover Financial Services. It trades about 0.05 of its potential returns per unit of risk. Discover Financial Services is currently generating about 0.06 per unit of risk. If you would invest  1,596  in Axway Software SA on October 7, 2024 and sell it today you would earn a total of  1,084  from holding Axway Software SA or generate 67.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.58%
Values	Daily Returns

Axway Software SA  vs.  Discover Financial Services

Axway Software SA

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Axway Software SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Axway Software may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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.

Pair Trading with Axway Software and Discover Financial

The main advantage of trading using opposite Axway Software and Discover Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Axway Software 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 Axway Software SA 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.

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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..