Correlation Between Virtu Financial and Discover Financial

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

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

Diversification Opportunities for Virtu Financial and Discover Financial

0.79

Correlation Coefficient

Virtu Financial  Discover Financial

Poor diversification

The 3 months correlation between Virtu and Discover is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Virtu Financial and Discover Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discover Financial and Virtu 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 Virtu Financial 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 Virtu Financial i.e., Virtu Financial and Discover Financial go up and down completely randomly.

Pair Corralation between Virtu Financial and Discover Financial

Assuming the 90 days horizon Virtu Financial is expected to generate 0.78 times more return on investment than Discover Financial. However, Virtu Financial is 1.29 times less risky than Discover Financial. It trades about 0.02 of its potential returns per unit of risk. Discover Financial Services is currently generating about -0.08 per unit of risk. If you would invest  3,378  in Virtu Financial on December 22, 2024 and sell it today you would earn a total of  22.00  from holding Virtu Financial or generate 0.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Virtu Financial  vs.  Discover Financial Services

Virtu Financial

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Virtu Financial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Virtu Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Virtu Financial and Discover Financial

The main advantage of trading using opposite Virtu Financial and Discover Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Virtu Financial 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 Virtu Financial 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.