Correlation Between Discover Financial and Regions Financial
Can any of the company-specific risk be diversified away by investing in both Discover Financial and Regions 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 Discover Financial and Regions Financial 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 Regions Financial Corp, you can compare the effects of market volatilities on Discover Financial and Regions 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 Discover Financial with a short position of Regions Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and Regions Financial.
Diversification Opportunities for Discover Financial and Regions Financial
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Discover and Regions is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and Regions Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regions Financial Corp 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 Regions Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regions Financial Corp has no effect on the direction of Discover Financial i.e., Discover Financial and Regions Financial go up and down completely randomly.
Pair Corralation between Discover Financial and Regions Financial
Assuming the 90 days trading horizon Discover Financial Services is expected to generate 1.13 times more return on investment than Regions Financial. However, Discover Financial is 1.13 times more volatile than Regions Financial Corp. It trades about 0.06 of its potential returns per unit of risk. Regions Financial Corp is currently generating about 0.04 per unit of risk. If you would invest 8,924 in Discover Financial Services on December 12, 2024 and sell it today you would earn a total of 6,843 from holding Discover Financial Services or generate 76.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.38% |
| Values | Daily Returns |
Discover Financial Services vs. Regions Financial Corp
Performance |
| Timeline |
| Discover Financial |
| Regions Financial Corp |
Discover Financial and Regions Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Discover Financial and Regions Financial
The main advantage of trading using opposite Discover Financial and Regions Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, Regions 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 Regions Financial will offset losses from the drop in Regions Financial's long position.| Discover Financial vs. Porvair plc | ||
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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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