Correlation Between Discover Financial and Cactus Acquisition
Can any of the company-specific risk be diversified away by investing in both Discover Financial and Cactus 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 Cactus 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 Cactus Acquisition Corp, you can compare the effects of market volatilities on Discover Financial and Cactus 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 Cactus Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and Cactus Acquisition.
Diversification Opportunities for Discover Financial and Cactus Acquisition
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Discover and Cactus is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and Cactus Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cactus Acquisition Corp 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 Cactus Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cactus Acquisition Corp has no effect on the direction of Discover Financial i.e., Discover Financial and Cactus Acquisition go up and down completely randomly.
Pair Corralation between Discover Financial and Cactus Acquisition
Considering the 90-day investment horizon Discover Financial Services is expected to under-perform the Cactus Acquisition. In addition to that, Discover Financial is 36.19 times more volatile than Cactus Acquisition Corp. It trades about -0.01 of its total potential returns per unit of risk. Cactus Acquisition Corp is currently generating about 0.13 per unit of volatility. If you would invest 1,106 in Cactus Acquisition Corp on December 28, 2024 and sell it today you would earn a total of 6.00 from holding Cactus Acquisition Corp or generate 0.54% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Discover Financial Services vs. Cactus Acquisition Corp
Performance |
Timeline |
Discover Financial |
Cactus Acquisition Corp |
Discover Financial and Cactus Acquisition Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Discover Financial and Cactus Acquisition
The main advantage of trading using opposite Discover Financial and Cactus Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, Cactus 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 Cactus Acquisition will offset losses from the drop in Cactus Acquisition's long position.Discover Financial vs. Visa Class A | Discover Financial vs. PayPal Holdings | Discover Financial vs. Capital One Financial | Discover Financial vs. Upstart Holdings |
Check out your portfolio center.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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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