Correlation Between Konica Minolta and Discover Financial

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

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

Diversification Opportunities for Konica Minolta and Discover Financial

0.57

Correlation Coefficient

Konica Minolta  Discover Financial

Very weak diversification

The 3 months correlation between Konica and Discover is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Konica Minolta and Discover Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discover Financial and Konica Minolta 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 Konica Minolta 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 Konica Minolta i.e., Konica Minolta and Discover Financial go up and down completely randomly.

Pair Corralation between Konica Minolta and Discover Financial

Assuming the 90 days horizon Konica Minolta is expected to generate 1.44 times more return on investment than Discover Financial. However, Konica Minolta is 1.44 times more volatile than Discover Financial Services. It trades about 0.05 of its potential returns per unit of risk. Discover Financial Services is currently generating about 0.06 per unit of risk. If you would invest  301.00  in Konica Minolta on September 20, 2024 and sell it today you would earn a total of  141.00  from holding Konica Minolta or generate 46.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	69.56%
Values	Daily Returns

Konica Minolta  vs.  Discover Financial Services

Konica Minolta

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Konica Minolta are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Konica Minolta reported solid returns over the last few months and may actually be approaching a breakup point.

Discover Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Discover Financial Services are ranked lower than 8 (%) 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.

Pair Trading with Konica Minolta and Discover Financial

The main advantage of trading using opposite Konica Minolta and Discover Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Konica Minolta 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 Konica Minolta 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.