Correlation Between Discover Financial and COSCO SHIPPING

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

Diversification Opportunities for Discover Financial and COSCO SHIPPING

0.67

Correlation Coefficient

Discover Financial  COSCO SHIPPING

Poor diversification

The 3 months correlation between Discover and COSCO is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and COSCO SHIPPING Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COSCO SHIPPING Energy 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 COSCO SHIPPING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COSCO SHIPPING Energy has no effect on the direction of Discover Financial i.e., Discover Financial and COSCO SHIPPING go up and down completely randomly.

Pair Corralation between Discover Financial and COSCO SHIPPING

Assuming the 90 days horizon Discover Financial Services is expected to under-perform the COSCO SHIPPING. But the stock apears to be less risky and, when comparing its historical volatility, Discover Financial Services is 1.23 times less risky than COSCO SHIPPING. The stock trades about -0.08 of its potential returns per unit of risk. The COSCO SHIPPING Energy is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  76.00  in COSCO SHIPPING Energy on December 21, 2024 and sell it today you would earn a total of  0.00  from holding COSCO SHIPPING Energy or generate 0.0% return on investment over 90 days.

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

Discover Financial Services  vs.  COSCO SHIPPING Energy

Discover Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Discover Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

COSCO SHIPPING Energy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in COSCO SHIPPING Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, COSCO SHIPPING 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 COSCO SHIPPING

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

The idea behind Discover Financial Services and COSCO SHIPPING Energy 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.