Correlation Between Discover Financial and Scorpius Holdings

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

Diversification Opportunities for Discover Financial and Scorpius Holdings

-0.34

Correlation Coefficient

Discover Financial  Scorpius Holdings

Very good diversification

The 3 months correlation between Discover and Scorpius is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and Scorpius Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scorpius 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 Scorpius Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scorpius Holdings has no effect on the direction of Discover Financial i.e., Discover Financial and Scorpius Holdings go up and down completely randomly.

Pair Corralation between Discover Financial and Scorpius Holdings

Considering the 90-day investment horizon Discover Financial is expected to generate 51.02 times less return on investment than Scorpius Holdings. But when comparing it to its historical volatility, Discover Financial Services is 12.28 times less risky than Scorpius Holdings. It trades about 0.02 of its potential returns per unit of risk. Scorpius Holdings is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  38.00  in Scorpius Holdings on October 10, 2024 and sell it today you would earn a total of  5.00  from holding Scorpius Holdings or generate 13.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Discover Financial Services  vs.  Scorpius Holdings

Discover Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Discover Financial Services are ranked lower than 10 (%) 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.

Scorpius Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Scorpius Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Discover Financial and Scorpius Holdings

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

The idea behind Discover Financial Services and Scorpius 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.