Correlation Between Discover Financial and Investcorp India
Can any of the company-specific risk be diversified away by investing in both Discover Financial and Investcorp India 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 Investcorp India 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 Investcorp India Acquisition, you can compare the effects of market volatilities on Discover Financial and Investcorp India 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 Investcorp India. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and Investcorp India.
Diversification Opportunities for Discover Financial and Investcorp India
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Discover and Investcorp is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and Investcorp India Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investcorp India 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 Investcorp India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investcorp India Acq has no effect on the direction of Discover Financial i.e., Discover Financial and Investcorp India go up and down completely randomly.
Pair Corralation between Discover Financial and Investcorp India
Considering the 90-day investment horizon Discover Financial Services is expected to generate 3.34 times more return on investment than Investcorp India. However, Discover Financial is 3.34 times more volatile than Investcorp India Acquisition. It trades about 0.09 of its potential returns per unit of risk. Investcorp India Acquisition is currently generating about 0.06 per unit of risk. If you would invest 17,949 in Discover Financial Services on December 1, 2024 and sell it today you would earn a total of 1,570 from holding Discover Financial Services or generate 8.75% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Discover Financial Services vs. Investcorp India Acquisition
Performance |
Timeline |
Discover Financial |
Investcorp India Acq |
Discover Financial and Investcorp India Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Discover Financial and Investcorp India
The main advantage of trading using opposite Discover Financial and Investcorp India positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, Investcorp India 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 Investcorp India will offset losses from the drop in Investcorp India's long position.Discover Financial vs. Ally Financial | Discover Financial vs. Synchrony Financial | Discover Financial vs. Western Union Co | Discover Financial vs. Bread Financial Holdings |
Investcorp India vs. Ihuman Inc | Investcorp India vs. LB Foster | Investcorp India vs. Afya | Investcorp India vs. Intuitive Surgical |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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