Correlation Between Discover Financial and Federal Realty
Can any of the company-specific risk be diversified away by investing in both Discover Financial and Federal Realty 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 Federal Realty 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 Federal Realty Investment, you can compare the effects of market volatilities on Discover Financial and Federal Realty 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 Federal Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and Federal Realty.
Diversification Opportunities for Discover Financial and Federal Realty
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Discover and Federal is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and Federal Realty Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Realty Investment 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 Federal Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Realty Investment has no effect on the direction of Discover Financial i.e., Discover Financial and Federal Realty go up and down completely randomly.
Pair Corralation between Discover Financial and Federal Realty
Assuming the 90 days trading horizon Discover Financial Services is expected to generate 1.71 times more return on investment than Federal Realty. However, Discover Financial is 1.71 times more volatile than Federal Realty Investment. It trades about 0.07 of its potential returns per unit of risk. Federal Realty Investment is currently generating about 0.04 per unit of risk. If you would invest 9,140 in Discover Financial Services on September 14, 2024 and sell it today you would earn a total of 8,640 from holding Discover Financial Services or generate 94.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.11% |
| Values | Daily Returns |
Discover Financial Services vs. Federal Realty Investment
Performance |
| Timeline |
| Discover Financial |
| Federal Realty Investment |
Discover Financial and Federal Realty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Discover Financial and Federal Realty
The main advantage of trading using opposite Discover Financial and Federal Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, Federal Realty 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 Federal Realty will offset losses from the drop in Federal Realty's long position.| Discover Financial vs. Dolly Varden Silver | Discover Financial vs. Ironveld Plc | Discover Financial vs. Baker Steel Resources | Discover Financial vs. Endeavour Mining Corp |
| Federal Realty vs. Sparebank 1 SR | Federal Realty vs. MT Bank Corp | Federal Realty vs. Charter Communications Cl | Federal Realty vs. Discover Financial Services |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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