Correlation Between Discover Financial and FONIX MOBILE

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

Diversification Opportunities for Discover Financial and FONIX MOBILE

-0.19

Correlation Coefficient

Discover Financial  FONIX MOBILE

Good diversification

The 3 months correlation between Discover and FONIX is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and FONIX MOBILE PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FONIX MOBILE PLC 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 FONIX MOBILE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FONIX MOBILE PLC has no effect on the direction of Discover Financial i.e., Discover Financial and FONIX MOBILE go up and down completely randomly.

Pair Corralation between Discover Financial and FONIX MOBILE

Assuming the 90 days horizon Discover Financial is expected to generate 24.21 times less return on investment than FONIX MOBILE. But when comparing it to its historical volatility, Discover Financial Services is 1.39 times less risky than FONIX MOBILE. It trades about 0.01 of its potential returns per unit of risk. FONIX MOBILE PLC is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  254.00  in FONIX MOBILE PLC on October 10, 2024 and sell it today you would earn a total of  8.00  from holding FONIX MOBILE PLC or generate 3.15% return on investment over 90 days.

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

Discover Financial Services  vs.  FONIX MOBILE PLC

Discover Financial

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Discover Financial Services are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Discover Financial reported solid returns over the last few months and may actually be approaching a breakup point.

FONIX MOBILE PLC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FONIX MOBILE PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, FONIX MOBILE is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Discover Financial and FONIX MOBILE

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

The idea behind Discover Financial Services and FONIX MOBILE PLC 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.