Correlation Between Discover Financial and Sydbank
Can any of the company-specific risk be diversified away by investing in both Discover Financial and Sydbank 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 Sydbank 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 Sydbank, you can compare the effects of market volatilities on Discover Financial and Sydbank 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 Sydbank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and Sydbank.
Diversification Opportunities for Discover Financial and Sydbank
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Discover and Sydbank is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and Sydbank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sydbank 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 Sydbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sydbank has no effect on the direction of Discover Financial i.e., Discover Financial and Sydbank go up and down completely randomly.
Pair Corralation between Discover Financial and Sydbank
Assuming the 90 days trading horizon Discover Financial Services is expected to generate 2.4 times more return on investment than Sydbank. However, Discover Financial is 2.4 times more volatile than Sydbank. It trades about 0.21 of its potential returns per unit of risk. Sydbank is currently generating about 0.13 per unit of risk. If you would invest 15,196 in Discover Financial Services on August 29, 2024 and sell it today you would earn a total of 2,986 from holding Discover Financial Services or generate 19.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Discover Financial Services vs. Sydbank
Performance |
| Timeline |
| Discover Financial |
| Sydbank |
Discover Financial and Sydbank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Discover Financial and Sydbank
The main advantage of trading using opposite Discover Financial and Sydbank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, Sydbank 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 Sydbank will offset losses from the drop in Sydbank's long position.| Discover Financial vs. Lendinvest PLC | Discover Financial vs. Neometals | Discover Financial vs. Coor Service Management | Discover Financial vs. Albion Technology General |
| Sydbank vs. Lendinvest PLC | Sydbank vs. Neometals | Sydbank vs. Coor Service Management | Sydbank vs. Albion Technology General |
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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