Correlation Between Light Science and Discover Financial

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

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

Diversification Opportunities for Light Science and Discover Financial

-0.17

Correlation Coefficient

Light Science  Discover Financial

Good diversification

The 3 months correlation between Light and Discover is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Light Science Technologies and Discover Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discover Financial and Light Science 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 Light Science Technologies 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 Light Science i.e., Light Science and Discover Financial go up and down completely randomly.

Pair Corralation between Light Science and Discover Financial

Assuming the 90 days trading horizon Light Science Technologies is expected to under-perform the Discover Financial. In addition to that, Light Science is 1.3 times more volatile than Discover Financial Services. It trades about -0.25 of its total potential returns per unit of risk. Discover Financial Services is currently generating about 0.3 per unit of volatility. If you would invest  17,637  in Discover Financial Services on October 25, 2024 and sell it today you would earn a total of  1,956  from holding Discover Financial Services or generate 11.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	89.47%
Values	Daily Returns

Light Science Technologies  vs.  Discover Financial Services

Light Science Techno

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Light Science Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Discover Financial

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Discover Financial Services are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Discover Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Light Science and Discover Financial

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

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.