Correlation Between Uber Technologies and Discover Financial

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

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

Diversification Opportunities for Uber Technologies and Discover Financial

-0.6

Correlation Coefficient

Uber Technologies  Discover Financial

Excellent diversification

The 3 months correlation between Uber and Discover is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Uber 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 Uber Technologies 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 Uber 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 Uber Technologies i.e., Uber Technologies and Discover Financial go up and down completely randomly.

Pair Corralation between Uber Technologies and Discover Financial

Given the investment horizon of 90 days Uber Technologies is expected to under-perform the Discover Financial. In addition to that, Uber Technologies is 1.03 times more volatile than Discover Financial Services. It trades about -0.02 of its total potential returns per unit of risk. Discover Financial Services is currently generating about 0.11 per unit of volatility. If you would invest  12,579  in Discover Financial Services on September 19, 2024 and sell it today you would earn a total of  4,809  from holding Discover Financial Services or generate 38.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.21%
Values	Daily Returns

Uber Technologies  vs.  Discover Financial Services

Uber Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Uber Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

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 abnormal 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 Uber Technologies and Discover Financial

The main advantage of trading using opposite Uber Technologies and Discover Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Uber Technologies 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 Uber 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 CEOs Directory module to screen CEOs from public companies around the world.