Correlation Between Discover Financial and AlphaVest Acquisition

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

Diversification Opportunities for Discover Financial and AlphaVest Acquisition

0.61

Correlation Coefficient

Discover Financial  AlphaVest Acquisition

Poor diversification

The 3 months correlation between Discover and AlphaVest is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and AlphaVest Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AlphaVest Acquisition 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 AlphaVest Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AlphaVest Acquisition has no effect on the direction of Discover Financial i.e., Discover Financial and AlphaVest Acquisition go up and down completely randomly.

Pair Corralation between Discover Financial and AlphaVest Acquisition

Considering the 90-day investment horizon Discover Financial Services is expected to under-perform the AlphaVest Acquisition. In addition to that, Discover Financial is 4.0 times more volatile than AlphaVest Acquisition Corp. It trades about -0.04 of its total potential returns per unit of risk. AlphaVest Acquisition Corp is currently generating about 0.0 per unit of volatility. If you would invest  1,131  in AlphaVest Acquisition Corp on December 29, 2024 and sell it today you would earn a total of  0.00  from holding AlphaVest Acquisition Corp or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Discover Financial Services  vs.  AlphaVest Acquisition Corp

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. In spite of comparatively stable technical and fundamental indicators, Discover Financial is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

AlphaVest Acquisition

Risk-Adjusted Performance

Very Weak

Over the last 90 days AlphaVest Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, AlphaVest Acquisition is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Discover Financial and AlphaVest Acquisition

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

The idea behind Discover Financial Services and AlphaVest Acquisition Corp 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.