Correlation Between Discover Financial and Bio Techne

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

Diversification Opportunities for Discover Financial and Bio Techne

0.06

Correlation Coefficient

Discover Financial  Bio Techne

Significant diversification

The 3 months correlation between Discover and Bio is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and Bio Techne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bio Techne 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 Bio Techne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bio Techne has no effect on the direction of Discover Financial i.e., Discover Financial and Bio Techne go up and down completely randomly.

Pair Corralation between Discover Financial and Bio Techne

Assuming the 90 days trading horizon Discover Financial Services is expected to generate 3.07 times more return on investment than Bio Techne. However, Discover Financial is 3.07 times more volatile than Bio Techne. It trades about 0.05 of its potential returns per unit of risk. Bio Techne is currently generating about -0.34 per unit of risk. If you would invest  41,723  in Discover Financial Services on December 24, 2024 and sell it today you would earn a total of  3,777  from holding Discover Financial Services or generate 9.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

Discover Financial Services  vs.  Bio Techne

Discover Financial

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Discover Financial Services are ranked lower than 4 (%) 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.

Bio Techne

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bio Techne has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Discover Financial and Bio Techne

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

The idea behind Discover Financial Services and Bio Techne 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.