Correlation Between Artisan Partners and Discover Financial

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

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

Diversification Opportunities for Artisan Partners and Discover Financial

0.91

Correlation Coefficient

Artisan Partners  Discover Financial

Almost no diversification

The 3 months correlation between Artisan and Discover is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Artisan Partners Asset and Discover Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discover Financial and Artisan Partners 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 Artisan Partners Asset 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 Artisan Partners i.e., Artisan Partners and Discover Financial go up and down completely randomly.

Pair Corralation between Artisan Partners and Discover Financial

Given the investment horizon of 90 days Artisan Partners Asset is expected to under-perform the Discover Financial. In addition to that, Artisan Partners is 1.13 times more volatile than Discover Financial Services. It trades about -0.24 of its total potential returns per unit of risk. Discover Financial Services is currently generating about -0.03 per unit of volatility. If you would invest  17,491  in Discover Financial Services on September 22, 2024 and sell it today you would lose (175.00) from holding Discover Financial Services or give up 1.0% of portfolio value over 90 days.

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

Artisan Partners Asset  vs.  Discover Financial Services

Artisan Partners Asset

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Artisan Partners Asset are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Artisan Partners is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Discover Financial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Discover Financial Services are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal technical and fundamental indicators, Discover Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Artisan Partners and Discover Financial

The main advantage of trading using opposite Artisan Partners and Discover Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Artisan Partners 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 Artisan Partners Asset 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.