Correlation Between Discover Financial and 694308KD8

Can any of the company-specific risk be diversified away by investing in both Discover Financial and 694308KD8 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 694308KD8 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 PCG 525 01 MAR 52, you can compare the effects of market volatilities on Discover Financial and 694308KD8 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 694308KD8. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and 694308KD8.

Diversification Opportunities for Discover Financial and 694308KD8

-0.67

Correlation Coefficient

Discover Financial  694308KD8

Excellent diversification

The 3 months correlation between Discover and 694308KD8 is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and PCG 525 01 MAR 52 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PCG 525 01 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 694308KD8. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PCG 525 01 has no effect on the direction of Discover Financial i.e., Discover Financial and 694308KD8 go up and down completely randomly.

Pair Corralation between Discover Financial and 694308KD8

Considering the 90-day investment horizon Discover Financial Services is expected to under-perform the 694308KD8. But the stock apears to be less risky and, when comparing its historical volatility, Discover Financial Services is 1.04 times less risky than 694308KD8. The stock trades about -0.04 of its potential returns per unit of risk. The PCG 525 01 MAR 52 is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  9,025  in PCG 525 01 MAR 52 on October 7, 2024 and sell it today you would lose (223.00) from holding PCG 525 01 MAR 52 or give up 2.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	87.8%
Values	Daily Returns

Discover Financial Services  vs.  PCG 525 01 MAR 52

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 weak technical and fundamental indicators, Discover Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

PCG 525 01

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PCG 525 01 MAR 52 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for PCG 525 01 MAR 52 investors.

Pair Trading with Discover Financial and 694308KD8

The main advantage of trading using opposite Discover Financial and 694308KD8 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, 694308KD8 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 694308KD8 will offset losses from the drop in 694308KD8's long position.

The idea behind Discover Financial Services and PCG 525 01 MAR 52 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.