Correlation Between HEDGE Brasil and Discover Financial

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

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

Diversification Opportunities for HEDGE Brasil and Discover Financial

-0.55

Correlation Coefficient

HEDGE Brasil  Discover Financial

Excellent diversification

The 3 months correlation between HEDGE and Discover is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding HEDGE Brasil Shopping and Discover Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discover Financial and HEDGE Brasil 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 HEDGE Brasil Shopping 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 HEDGE Brasil i.e., HEDGE Brasil and Discover Financial go up and down completely randomly.

Pair Corralation between HEDGE Brasil and Discover Financial

If you would invest  17,849  in HEDGE Brasil Shopping on October 6, 2024 and sell it today you would earn a total of  956.00  from holding HEDGE Brasil Shopping or generate 5.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

HEDGE Brasil Shopping  vs.  Discover Financial Services

HEDGE Brasil Shopping

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HEDGE Brasil Shopping has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong fundamental drivers, HEDGE Brasil is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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

Pair Trading with HEDGE Brasil and Discover Financial

The main advantage of trading using opposite HEDGE Brasil and Discover Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HEDGE Brasil 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 HEDGE Brasil Shopping 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.