Correlation Between ProSiebenSat1 Media and Discover Financial

Can any of the company-specific risk be diversified away by investing in both ProSiebenSat1 Media 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 ProSiebenSat1 Media and Discover Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ProSiebenSat1 Media SE and Discover Financial Services, you can compare the effects of market volatilities on ProSiebenSat1 Media 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 ProSiebenSat1 Media with a short position of Discover Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProSiebenSat1 Media and Discover Financial.

Diversification Opportunities for ProSiebenSat1 Media and Discover Financial

-0.38

Correlation Coefficient

ProSiebenSat1 Media  Discover Financial

Very good diversification

The 3 months correlation between ProSiebenSat1 and Discover is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding ProSiebenSat1 Media SE and Discover Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discover Financial and ProSiebenSat1 Media 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 ProSiebenSat1 Media SE 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 ProSiebenSat1 Media i.e., ProSiebenSat1 Media and Discover Financial go up and down completely randomly.

Pair Corralation between ProSiebenSat1 Media and Discover Financial

Assuming the 90 days horizon ProSiebenSat1 Media SE is expected to generate 0.92 times more return on investment than Discover Financial. However, ProSiebenSat1 Media SE is 1.08 times less risky than Discover Financial. It trades about 0.16 of its potential returns per unit of risk. Discover Financial Services is currently generating about -0.05 per unit of risk. If you would invest  504.00  in ProSiebenSat1 Media SE on December 25, 2024 and sell it today you would earn a total of  129.00  from holding ProSiebenSat1 Media SE or generate 25.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

ProSiebenSat1 Media SE  vs.  Discover Financial Services

ProSiebenSat1 Media

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProSiebenSat1 Media SE are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ProSiebenSat1 Media 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. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with ProSiebenSat1 Media and Discover Financial

The main advantage of trading using opposite ProSiebenSat1 Media and Discover Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProSiebenSat1 Media 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 ProSiebenSat1 Media SE 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.