Correlation Between Discover Financial and 018581AL2

Can any of the company-specific risk be diversified away by investing in both Discover Financial and 018581AL2 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 018581AL2 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 BFH 7 15 JAN 26, you can compare the effects of market volatilities on Discover Financial and 018581AL2 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 018581AL2. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and 018581AL2.

Diversification Opportunities for Discover Financial and 018581AL2

-0.34

Correlation Coefficient

Discover Financial  018581AL2

Very good diversification

The 3 months correlation between Discover and 018581AL2 is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and BFH 7 15 JAN 26 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 018581AL2 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 018581AL2. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 018581AL2 has no effect on the direction of Discover Financial i.e., Discover Financial and 018581AL2 go up and down completely randomly.

Pair Corralation between Discover Financial and 018581AL2

Considering the 90-day investment horizon Discover Financial Services is expected to under-perform the 018581AL2. In addition to that, Discover Financial is 2.57 times more volatile than BFH 7 15 JAN 26. It trades about -0.03 of its total potential returns per unit of risk. BFH 7 15 JAN 26 is currently generating about 0.16 per unit of volatility. If you would invest  9,980  in BFH 7 15 JAN 26 on September 22, 2024 and sell it today you would earn a total of  44.00  from holding BFH 7 15 JAN 26 or generate 0.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	23.81%
Values	Daily Returns

Discover Financial Services  vs.  BFH 7 15 JAN 26

Discover Financial

Risk-Adjusted Performance

9 of 100

OK

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

018581AL2

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BFH 7 15 JAN 26 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, 018581AL2 is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Discover Financial and 018581AL2

The main advantage of trading using opposite Discover Financial and 018581AL2 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, 018581AL2 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 018581AL2 will offset losses from the drop in 018581AL2's long position.

The idea behind Discover Financial Services and BFH 7 15 JAN 26 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.