Correlation Between Discover Financial and Ametek
Can any of the company-specific risk be diversified away by investing in both Discover Financial and Ametek 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 Discover Financial and Ametek into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Discover Financial Services and Ametek Inc, you can compare the effects of market volatilities on Discover Financial and Ametek 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 Discover Financial with a short position of Ametek. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and Ametek.
Diversification Opportunities for Discover Financial and Ametek
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Discover and Ametek is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and Ametek Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ametek Inc and Discover Financial 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 Discover Financial Services are associated (or correlated) with Ametek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ametek Inc has no effect on the direction of Discover Financial i.e., Discover Financial and Ametek go up and down completely randomly.
Pair Corralation between Discover Financial and Ametek
Assuming the 90 days trading horizon Discover Financial Services is expected to generate 1.71 times more return on investment than Ametek. However, Discover Financial is 1.71 times more volatile than Ametek Inc. It trades about 0.18 of its potential returns per unit of risk. Ametek Inc is currently generating about 0.21 per unit of risk. If you would invest 14,291 in Discover Financial Services on September 5, 2024 and sell it today you would earn a total of 3,530 from holding Discover Financial Services or generate 24.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Discover Financial Services vs. Ametek Inc
Performance |
| Timeline |
| Discover Financial |
| Ametek Inc |
Discover Financial and Ametek Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Discover Financial and Ametek
The main advantage of trading using opposite Discover Financial and Ametek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, Ametek 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 Ametek will offset losses from the drop in Ametek's long position.| Discover Financial vs. GreenX Metals | Discover Financial vs. Panther Metals PLC | Discover Financial vs. Ecclesiastical Insurance Office | Discover Financial vs. Cornish Metals |
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Check out your portfolio center.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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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