Correlation Between CAP LEASE and Discover Financial

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

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

Diversification Opportunities for CAP LEASE and Discover Financial

-0.82

Correlation Coefficient

CAP LEASE  Discover Financial

Pay attention - limited upside

The 3 months correlation between CAP and Discover is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding CAP LEASE AVIATION and Discover Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discover Financial and CAP LEASE 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 CAP LEASE AVIATION 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 CAP LEASE i.e., CAP LEASE and Discover Financial go up and down completely randomly.

Pair Corralation between CAP LEASE and Discover Financial

Assuming the 90 days trading horizon CAP LEASE AVIATION is expected to generate 0.87 times more return on investment than Discover Financial. However, CAP LEASE AVIATION is 1.15 times less risky than Discover Financial. It trades about 0.23 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  48.00  in CAP LEASE AVIATION on October 7, 2024 and sell it today you would earn a total of  2.00  from holding CAP LEASE AVIATION or generate 4.17% return on investment over 90 days.

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

CAP LEASE AVIATION  vs.  Discover Financial Services

CAP LEASE AVIATION

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CAP LEASE AVIATION has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Discover Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Discover Financial Services are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Discover Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CAP LEASE and Discover Financial

The main advantage of trading using opposite CAP LEASE and Discover Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CAP LEASE 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 CAP LEASE AVIATION 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..