Correlation Between Discover Financial and Oportun Financial

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

Diversification Opportunities for Discover Financial and Oportun Financial

0.07

Correlation Coefficient

Discover Financial  Oportun Financial

Significant diversification

The 3 months correlation between Discover and Oportun is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and Oportun Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oportun Financial Corp 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 Oportun Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oportun Financial Corp has no effect on the direction of Discover Financial i.e., Discover Financial and Oportun Financial go up and down completely randomly.

Pair Corralation between Discover Financial and Oportun Financial

Considering the 90-day investment horizon Discover Financial Services is expected to under-perform the Oportun Financial. But the stock apears to be less risky and, when comparing its historical volatility, Discover Financial Services is 2.22 times less risky than Oportun Financial. The stock trades about -0.04 of its potential returns per unit of risk. The Oportun Financial Corp is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  398.00  in Oportun Financial Corp on December 29, 2024 and sell it today you would earn a total of  163.00  from holding Oportun Financial Corp or generate 40.95% return on investment over 90 days.

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

Discover Financial Services  vs.  Oportun Financial Corp

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.

Oportun Financial Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Oportun Financial Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Oportun Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Discover Financial and Oportun Financial

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

The idea behind Discover Financial Services and Oportun Financial Corp 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.