Correlation Between Calibre Mining and Discover Financial

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

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

Diversification Opportunities for Calibre Mining and Discover Financial

-0.43

Correlation Coefficient

Calibre Mining  Discover Financial

Very good diversification

The 3 months correlation between Calibre and Discover is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Calibre Mining Corp and Discover Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discover Financial and Calibre Mining 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 Calibre Mining Corp 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 Calibre Mining i.e., Calibre Mining and Discover Financial go up and down completely randomly.

Pair Corralation between Calibre Mining and Discover Financial

Assuming the 90 days trading horizon Calibre Mining is expected to generate 1.72 times less return on investment than Discover Financial. In addition to that, Calibre Mining is 1.08 times more volatile than Discover Financial Services. It trades about 0.06 of its total potential returns per unit of risk. Discover Financial Services is currently generating about 0.12 per unit of volatility. If you would invest  12,942  in Discover Financial Services on October 26, 2024 and sell it today you would earn a total of  5,190  from holding Discover Financial Services or generate 40.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Calibre Mining Corp  vs.  Discover Financial Services

Calibre Mining Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Calibre Mining Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Calibre Mining is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Discover Financial

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Discover Financial Services are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Discover Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Calibre Mining and Discover Financial

The main advantage of trading using opposite Calibre Mining and Discover Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Calibre Mining 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 Calibre Mining Corp 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.