Correlation Between PLAYMATES TOYS and Discover Financial

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

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

Diversification Opportunities for PLAYMATES TOYS and Discover Financial

0.0

Correlation Coefficient

PLAYMATES TOYS  Discover Financial

Pay attention - limited upside

The 3 months correlation between PLAYMATES and Discover is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding PLAYMATES TOYS and Discover Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discover Financial and PLAYMATES TOYS 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 PLAYMATES TOYS 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 PLAYMATES TOYS i.e., PLAYMATES TOYS and Discover Financial go up and down completely randomly.

Pair Corralation between PLAYMATES TOYS and Discover Financial

Assuming the 90 days trading horizon PLAYMATES TOYS is expected to generate 2.53 times more return on investment than Discover Financial. However, PLAYMATES TOYS is 2.53 times more volatile than Discover Financial Services. It trades about 0.07 of its potential returns per unit of risk. Discover Financial Services is currently generating about 0.12 per unit of risk. If you would invest  2.95  in PLAYMATES TOYS on September 14, 2024 and sell it today you would earn a total of  3.65  from holding PLAYMATES TOYS or generate 123.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

PLAYMATES TOYS  vs.  Discover Financial Services

PLAYMATES TOYS

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PLAYMATES TOYS are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, PLAYMATES TOYS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Discover Financial

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Discover Financial Services are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Discover Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PLAYMATES TOYS and Discover Financial

The main advantage of trading using opposite PLAYMATES TOYS and Discover Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PLAYMATES TOYS 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 PLAYMATES TOYS 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.