Correlation Between Discover Financial and INGEVITY

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Can any of the company-specific risk be diversified away by investing in both Discover Financial and INGEVITY 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 INGEVITY 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 INGEVITY P 3875, you can compare the effects of market volatilities on Discover Financial and INGEVITY 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 INGEVITY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and INGEVITY.

Diversification Opportunities for Discover Financial and INGEVITY

DiscoverINGEVITYDiversified AwayDiscoverINGEVITYDiversified Away100%
-0.19
  Correlation Coefficient

Good diversification

The 3 months correlation between Discover and INGEVITY is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and INGEVITY P 3875 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INGEVITY P 3875 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 INGEVITY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INGEVITY P 3875 has no effect on the direction of Discover Financial i.e., Discover Financial and INGEVITY go up and down completely randomly.

Pair Corralation between Discover Financial and INGEVITY

Considering the 90-day investment horizon Discover Financial Services is expected to generate 2.39 times more return on investment than INGEVITY. However, Discover Financial is 2.39 times more volatile than INGEVITY P 3875. It trades about 0.1 of its potential returns per unit of risk. INGEVITY P 3875 is currently generating about -0.15 per unit of risk. If you would invest  14,191  in Discover Financial Services on September 20, 2024 and sell it today you would earn a total of  2,635  from holding Discover Financial Services or generate 18.57% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy92.06%
ValuesDaily Returns

Discover Financial Services  vs.  INGEVITY P 3875

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec 020406080
JavaScript chart by amCharts 3.21.15DFS 45688CAB3
       Timeline  
Discover Financial 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Discover Financial Services are ranked lower than 7 (%) 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.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec140150160170180
INGEVITY P 3875 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days INGEVITY P 3875 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for INGEVITY P 3875 investors.
JavaScript chart by amCharts 3.21.15282331224023302231224023

Discover Financial and INGEVITY Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-9.83-7.36-4.89-2.430.02.575.187.7910.4 0.050.100.15
JavaScript chart by amCharts 3.21.15DFS 45688CAB3
       Returns  

Pair Trading with Discover Financial and INGEVITY

The main advantage of trading using opposite Discover Financial and INGEVITY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, INGEVITY 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 INGEVITY will offset losses from the drop in INGEVITY's long position.
The idea behind Discover Financial Services and INGEVITY P 3875 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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