Correlation Between Cheche Group and Discover Financial

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

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

Diversification Opportunities for Cheche Group and Discover Financial

0.62

Correlation Coefficient

Cheche Group  Discover Financial

Poor diversification

The 3 months correlation between Cheche and Discover is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Cheche Group Class and Discover Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discover Financial and Cheche Group 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 Cheche Group Class 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 Cheche Group i.e., Cheche Group and Discover Financial go up and down completely randomly.

Pair Corralation between Cheche Group and Discover Financial

Considering the 90-day investment horizon Cheche Group Class is expected to generate 2.71 times more return on investment than Discover Financial. However, Cheche Group is 2.71 times more volatile than Discover Financial Services. It trades about 0.12 of its potential returns per unit of risk. Discover Financial Services is currently generating about -0.04 per unit of risk. If you would invest  82.00  in Cheche Group Class on October 12, 2024 and sell it today you would earn a total of  6.00  from holding Cheche Group Class or generate 7.32% return on investment over 90 days.

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

Cheche Group Class  vs.  Discover Financial Services

Cheche Group Class

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cheche Group Class are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady fundamental indicators, Cheche Group reported solid returns over the last few months and may actually be approaching a breakup point.

Discover Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Discover Financial Services are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak 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 Cheche Group and Discover Financial

The main advantage of trading using opposite Cheche Group and Discover Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cheche Group 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 Cheche Group Class 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.