Correlation Between Discover Financial and Chiba Bank

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

Diversification Opportunities for Discover Financial and Chiba Bank

0.0

Correlation Coefficient

Discover Financial  Chiba Bank

Pay attention - limited upside

The 3 months correlation between Discover and Chiba is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and Chiba Bank Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chiba Bank 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 Chiba Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chiba Bank has no effect on the direction of Discover Financial i.e., Discover Financial and Chiba Bank go up and down completely randomly.

Pair Corralation between Discover Financial and Chiba Bank

If you would invest  3,768  in Chiba Bank Ltd on December 26, 2024 and sell it today you would earn a total of  0.00  from holding Chiba Bank Ltd or generate 0.0% return on investment over 90 days.

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

Discover Financial Services  vs.  Chiba Bank Ltd

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.

Chiba Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chiba Bank Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Chiba Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Discover Financial and Chiba Bank

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

The idea behind Discover Financial Services and Chiba Bank Ltd 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.