Correlation Between Hamilton Insurance and Discover Financial

Can any of the company-specific risk be diversified away by investing in both Hamilton Insurance and Discover Financial 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 Hamilton Insurance and Discover Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hamilton Insurance Group, and Discover Financial Services, you can compare the effects of market volatilities on Hamilton Insurance and Discover Financial 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 Hamilton Insurance with a short position of Discover Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hamilton Insurance and Discover Financial.

Diversification Opportunities for Hamilton Insurance and Discover Financial

-0.62

Correlation Coefficient

Hamilton Insurance  Discover Financial

Excellent diversification

The 3 months correlation between Hamilton and Discover is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Hamilton Insurance Group, and Discover Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discover Financial and Hamilton Insurance 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 Hamilton Insurance Group, are associated (or correlated) with Discover Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Discover Financial has no effect on the direction of Hamilton Insurance i.e., Hamilton Insurance and Discover Financial go up and down completely randomly.

Pair Corralation between Hamilton Insurance and Discover Financial

Allowing for the 90-day total investment horizon Hamilton Insurance Group, is expected to generate 0.69 times more return on investment than Discover Financial. However, Hamilton Insurance Group, is 1.45 times less risky than Discover Financial. It trades about 0.12 of its potential returns per unit of risk. Discover Financial Services is currently generating about -0.04 per unit of risk. If you would invest  1,890  in Hamilton Insurance Group, on December 29, 2024 and sell it today you would earn a total of  244.00  from holding Hamilton Insurance Group, or generate 12.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Hamilton Insurance Group,  vs.  Discover Financial Services

Hamilton Insurance Group,

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hamilton Insurance Group, are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Hamilton Insurance reported solid returns over the last few months and may actually be approaching a breakup point.

Discover Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Discover Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Discover Financial is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Hamilton Insurance and Discover Financial

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

The idea behind Hamilton Insurance Group, and Discover Financial Services 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.