Correlation Between Discover Financial and Inception Growth

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

Diversification Opportunities for Discover Financial and Inception Growth

0.63

Correlation Coefficient

Discover Financial  Inception Growth

Poor diversification

The 3 months correlation between Discover and Inception is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and Inception Growth Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inception Growth Acq 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 Inception Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inception Growth Acq has no effect on the direction of Discover Financial i.e., Discover Financial and Inception Growth go up and down completely randomly.

Pair Corralation between Discover Financial and Inception Growth

Considering the 90-day investment horizon Discover Financial Services is expected to generate 1.06 times more return on investment than Inception Growth. However, Discover Financial is 1.06 times more volatile than Inception Growth Acquisition. It trades about 0.29 of its potential returns per unit of risk. Inception Growth Acquisition is currently generating about -0.27 per unit of risk. If you would invest  16,927  in Discover Financial Services on October 20, 2024 and sell it today you would earn a total of  1,791  from holding Discover Financial Services or generate 10.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	36.84%
Values	Daily Returns

Discover Financial Services  vs.  Inception Growth Acquisition

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 weak technical and fundamental indicators, Discover Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Inception Growth Acq

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inception Growth Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Discover Financial and Inception Growth

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

The idea behind Discover Financial Services and Inception Growth Acquisition 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.

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 Commodity Directory module to find actively traded commodities issued by global exchanges.