Correlation Between Discover Financial and Fair Isaac

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

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

Diversification Opportunities for Discover Financial and Fair Isaac

0.7

Correlation Coefficient

Discover Financial  Fair Isaac

Poor diversification

The 3 months correlation between Discover and Fair is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and Fair Isaac in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fair Isaac and Discover Financial 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 Discover Financial Services are associated (or correlated) with Fair Isaac. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fair Isaac has no effect on the direction of Discover Financial i.e., Discover Financial and Fair Isaac go up and down completely randomly.

Pair Corralation between Discover Financial and Fair Isaac

If you would invest  41,833  in Discover Financial Services on October 8, 2024 and sell it today you would earn a total of  0.00  from holding Discover Financial Services or generate 0.0% return on investment over 90 days.

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

Discover Financial Services  vs.  Fair Isaac

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. Despite somewhat weak technical and fundamental indicators, Discover Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Fair Isaac

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fair Isaac are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, Fair Isaac may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Discover Financial and Fair Isaac

The main advantage of trading using opposite Discover Financial and Fair Isaac positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, Fair Isaac 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 Fair Isaac will offset losses from the drop in Fair Isaac's long position.

The idea behind Discover Financial Services and Fair Isaac 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.