Correlation Between Discover Financial and Amkor Technology

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

Diversification Opportunities for Discover Financial and Amkor Technology

-0.8

Correlation Coefficient

Discover Financial  Amkor Technology

Pay attention - limited upside

The 3 months correlation between Discover and Amkor is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and Amkor Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amkor Technology 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 Amkor Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amkor Technology has no effect on the direction of Discover Financial i.e., Discover Financial and Amkor Technology go up and down completely randomly.

Pair Corralation between Discover Financial and Amkor Technology

Considering the 90-day investment horizon Discover Financial Services is expected to generate 1.35 times more return on investment than Amkor Technology. However, Discover Financial is 1.35 times more volatile than Amkor Technology. It trades about 0.15 of its potential returns per unit of risk. Amkor Technology is currently generating about -0.05 per unit of risk. If you would invest  13,556  in Discover Financial Services on September 18, 2024 and sell it today you would earn a total of  4,112  from holding Discover Financial Services or generate 30.33% return on investment over 90 days.

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

Discover Financial Services  vs.  Amkor Technology

Discover Financial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Discover Financial Services are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal technical and fundamental indicators, Discover Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Amkor Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amkor Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's forward-looking signals remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Discover Financial and Amkor Technology

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

The idea behind Discover Financial Services and Amkor Technology 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 Global Correlations module to find global opportunities by holding instruments from different markets.