Correlation Between Discover Financial and AB Volvo

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

Diversification Opportunities for Discover Financial and AB Volvo

0.04

Correlation Coefficient

Discover Financial  AB Volvo

Significant diversification

The 3 months correlation between Discover and VOL3 is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and AB Volvo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB Volvo 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 AB Volvo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB Volvo has no effect on the direction of Discover Financial i.e., Discover Financial and AB Volvo go up and down completely randomly.

Pair Corralation between Discover Financial and AB Volvo

Assuming the 90 days horizon Discover Financial Services is expected to under-perform the AB Volvo. In addition to that, Discover Financial is 1.44 times more volatile than AB Volvo. It trades about -0.08 of its total potential returns per unit of risk. AB Volvo is currently generating about 0.19 per unit of volatility. If you would invest  2,334  in AB Volvo on December 21, 2024 and sell it today you would earn a total of  542.00  from holding AB Volvo or generate 23.22% return on investment over 90 days.

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

Discover Financial Services  vs.  AB Volvo

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.

AB Volvo

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AB Volvo are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, AB Volvo reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Discover Financial and AB Volvo

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

The idea behind Discover Financial Services and AB Volvo 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.