Correlation Between Discover Financial and N2OFF

Can any of the company-specific risk be diversified away by investing in both Discover Financial and N2OFF 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 N2OFF 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 N2OFF Inc, you can compare the effects of market volatilities on Discover Financial and N2OFF 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 N2OFF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and N2OFF.

Diversification Opportunities for Discover Financial and N2OFF

0.25

Correlation Coefficient

Discover Financial  N2OFF

Modest diversification

The 3 months correlation between Discover and N2OFF is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and N2OFF Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on N2OFF Inc 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 N2OFF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of N2OFF Inc has no effect on the direction of Discover Financial i.e., Discover Financial and N2OFF go up and down completely randomly.

Pair Corralation between Discover Financial and N2OFF

Considering the 90-day investment horizon Discover Financial is expected to generate 35.0 times less return on investment than N2OFF. But when comparing it to its historical volatility, Discover Financial Services is 41.17 times less risky than N2OFF. It trades about 0.35 of its potential returns per unit of risk. N2OFF Inc is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  19.00  in N2OFF Inc on October 25, 2024 and sell it today you would earn a total of  106.00  from holding N2OFF Inc or generate 557.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Discover Financial Services  vs.  N2OFF Inc

Discover Financial

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Discover Financial Services are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating technical and fundamental indicators, Discover Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

N2OFF Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in N2OFF Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, N2OFF displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Discover Financial and N2OFF

The main advantage of trading using opposite Discover Financial and N2OFF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, N2OFF 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 N2OFF will offset losses from the drop in N2OFF's long position.

The idea behind Discover Financial Services and N2OFF Inc 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.