Correlation Between CHEVRON and Discover Financial

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

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

Diversification Opportunities for CHEVRON and Discover Financial

0.0

Correlation Coefficient

CHEVRON  Discover Financial

Pay attention - limited upside

The 3 months correlation between CHEVRON and Discover is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding CHEVRON P and Discover Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discover Financial and CHEVRON 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 CHEVRON P 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 CHEVRON i.e., CHEVRON and Discover Financial go up and down completely randomly.

Pair Corralation between CHEVRON and Discover Financial

If you would invest  17,676  in Discover Financial Services on October 9, 2024 and sell it today you would earn a total of  245.00  from holding Discover Financial Services or generate 1.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	5.26%
Values	Daily Returns

CHEVRON P  vs.  Discover Financial Services

CHEVRON P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHEVRON P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CHEVRON 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. 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 CHEVRON and Discover Financial

The main advantage of trading using opposite CHEVRON and Discover Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHEVRON 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 CHEVRON P 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.