Correlation Between Discover Financial and Targa Resources
Can any of the company-specific risk be diversified away by investing in both Discover Financial and Targa Resources 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 Targa Resources 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 Targa Resources Corp, you can compare the effects of market volatilities on Discover Financial and Targa Resources 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 Targa Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and Targa Resources.
Diversification Opportunities for Discover Financial and Targa Resources
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Discover and Targa is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and Targa Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Targa Resources 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 Targa Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Targa Resources Corp has no effect on the direction of Discover Financial i.e., Discover Financial and Targa Resources go up and down completely randomly.
Pair Corralation between Discover Financial and Targa Resources
Assuming the 90 days trading horizon Discover Financial is expected to generate 1.05 times less return on investment than Targa Resources. In addition to that, Discover Financial is 1.34 times more volatile than Targa Resources Corp. It trades about 0.1 of its total potential returns per unit of risk. Targa Resources Corp is currently generating about 0.14 per unit of volatility. If you would invest 8,490 in Targa Resources Corp on December 7, 2024 and sell it today you would earn a total of 9,599 from holding Targa Resources Corp or generate 113.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.71% |
| Values | Daily Returns |
Discover Financial Services vs. Targa Resources Corp
Performance |
| Timeline |
| Discover Financial |
| Targa Resources Corp |
Discover Financial and Targa Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Discover Financial and Targa Resources
The main advantage of trading using opposite Discover Financial and Targa Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, Targa Resources 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 Targa Resources will offset losses from the drop in Targa Resources' long position.| Discover Financial vs. United Utilities Group | Discover Financial vs. SBM Offshore NV | Discover Financial vs. Clean Power Hydrogen | Discover Financial vs. Ecofin Global Utilities |
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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