Correlation Between Discover Financial and OneMain Holdings

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

Diversification Opportunities for Discover Financial and OneMain Holdings

0.67

Correlation Coefficient

Discover Financial  OneMain Holdings

Poor diversification

The 3 months correlation between Discover and OneMain is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and OneMain Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OneMain Holdings 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 OneMain Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OneMain Holdings has no effect on the direction of Discover Financial i.e., Discover Financial and OneMain Holdings go up and down completely randomly.

Pair Corralation between Discover Financial and OneMain Holdings

Considering the 90-day investment horizon Discover Financial Services is expected to under-perform the OneMain Holdings. In addition to that, Discover Financial is 1.33 times more volatile than OneMain Holdings. It trades about -0.37 of its total potential returns per unit of risk. OneMain Holdings is currently generating about -0.37 per unit of volatility. If you would invest  5,476  in OneMain Holdings on December 10, 2024 and sell it today you would lose (816.00) from holding OneMain Holdings or give up 14.9% of portfolio value over 90 days.

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

Discover Financial Services  vs.  OneMain Holdings

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 latest weak performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

OneMain Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days OneMain Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Discover Financial and OneMain Holdings

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

The idea behind Discover Financial Services and OneMain Holdings 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..