Correlation Between Discover Financial and Taronis Fuels

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

Diversification Opportunities for Discover Financial and Taronis Fuels

0.33

Correlation Coefficient

Discover Financial  Taronis Fuels

Weak diversification

The 3 months correlation between Discover and Taronis is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and Taronis Fuels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taronis Fuels 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 Taronis Fuels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taronis Fuels has no effect on the direction of Discover Financial i.e., Discover Financial and Taronis Fuels go up and down completely randomly.

Pair Corralation between Discover Financial and Taronis Fuels

Considering the 90-day investment horizon Discover Financial is expected to generate 175.42 times less return on investment than Taronis Fuels. But when comparing it to its historical volatility, Discover Financial Services is 67.2 times less risky than Taronis Fuels. It trades about 0.06 of its potential returns per unit of risk. Taronis Fuels is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  5.61  in Taronis Fuels on October 10, 2024 and sell it today you would lose (5.60) from holding Taronis Fuels or give up 99.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	81.85%
Values	Daily Returns

Discover Financial Services  vs.  Taronis Fuels

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.

Taronis Fuels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taronis Fuels has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Taronis Fuels is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Discover Financial and Taronis Fuels

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

The idea behind Discover Financial Services and Taronis Fuels 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.