Correlation Between Booking Holdings and Discover Financial
Can any of the company-specific risk be diversified away by investing in both Booking Holdings 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 Booking Holdings and Discover Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Booking Holdings and Discover Financial Services, you can compare the effects of market volatilities on Booking Holdings 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 Booking Holdings with a short position of Discover Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Booking Holdings and Discover Financial.
Diversification Opportunities for Booking Holdings and Discover Financial
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Booking and Discover is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Booking Holdings and Discover Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discover Financial and Booking Holdings 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 Booking Holdings 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 Booking Holdings i.e., Booking Holdings and Discover Financial go up and down completely randomly.
Pair Corralation between Booking Holdings and Discover Financial
Assuming the 90 days trading horizon Booking Holdings is expected to generate 2.96 times more return on investment than Discover Financial. However, Booking Holdings is 2.96 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 0.07 per unit of risk. If you would invest 207,502 in Booking Holdings on September 25, 2024 and sell it today you would earn a total of 297,498 from holding Booking Holdings or generate 143.37% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 98.16% |
Values | Daily Returns |
Booking Holdings vs. Discover Financial Services
Performance |
Timeline |
Booking Holdings |
Discover Financial |
Booking Holdings and Discover Financial Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Booking Holdings and Discover Financial
The main advantage of trading using opposite Booking Holdings and Discover Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Booking Holdings 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.Booking Holdings vs. Discover Financial Services | Booking Holdings vs. Sparebank 1 SR | Booking Holdings vs. Austevoll Seafood ASA | Booking Holdings vs. Grieg Seafood |
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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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