Correlation Between Discover Financial and Iron Mountain

Can any of the company-specific risk be diversified away by investing in both Discover Financial and Iron Mountain 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 Iron Mountain 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 Iron Mountain Incorporated, you can compare the effects of market volatilities on Discover Financial and Iron Mountain 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 Iron Mountain. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and Iron Mountain.

Diversification Opportunities for Discover Financial and Iron Mountain

0.44

Correlation Coefficient

Discover Financial  Iron Mountain

Very weak diversification

The 3 months correlation between Discover and Iron is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and Iron Mountain Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iron Mountain 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 Iron Mountain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iron Mountain has no effect on the direction of Discover Financial i.e., Discover Financial and Iron Mountain go up and down completely randomly.

Pair Corralation between Discover Financial and Iron Mountain

Assuming the 90 days trading horizon Discover Financial Services is expected to generate 1.11 times more return on investment than Iron Mountain. However, Discover Financial is 1.11 times more volatile than Iron Mountain Incorporated. It trades about 0.13 of its potential returns per unit of risk. Iron Mountain Incorporated is currently generating about 0.01 per unit of risk. If you would invest  35,375  in Discover Financial Services on October 7, 2024 and sell it today you would earn a total of  6,458  from holding Discover Financial Services or generate 18.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Discover Financial Services  vs.  Iron Mountain Incorporated

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.

Iron Mountain

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iron Mountain Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Iron Mountain is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Discover Financial and Iron Mountain

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

The idea behind Discover Financial Services and Iron Mountain Incorporated 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.