Correlation Between Discover Financial and CaliberCos

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

Diversification Opportunities for Discover Financial and CaliberCos

-0.12

Correlation Coefficient

Discover Financial  CaliberCos

Good diversification

The 3 months correlation between Discover and CaliberCos is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and CaliberCos Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CaliberCos Class A 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 CaliberCos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CaliberCos Class A has no effect on the direction of Discover Financial i.e., Discover Financial and CaliberCos go up and down completely randomly.

Pair Corralation between Discover Financial and CaliberCos

Considering the 90-day investment horizon Discover Financial Services is expected to under-perform the CaliberCos. But the stock apears to be less risky and, when comparing its historical volatility, Discover Financial Services is 2.28 times less risky than CaliberCos. The stock trades about -0.02 of its potential returns per unit of risk. The CaliberCos Class A is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  53.00  in CaliberCos Class A on December 21, 2024 and sell it today you would earn a total of  12.00  from holding CaliberCos Class A or generate 22.64% return on investment over 90 days.

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

Discover Financial Services  vs.  CaliberCos Class A

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.

CaliberCos Class A

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CaliberCos Class A are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, CaliberCos exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Discover Financial and CaliberCos

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

The idea behind Discover Financial Services and CaliberCos Class A 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.