Correlation Between Discover Financial and Seche Environnement
Can any of the company-specific risk be diversified away by investing in both Discover Financial and Seche Environnement 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 Seche Environnement 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 Seche Environnement SA, you can compare the effects of market volatilities on Discover Financial and Seche Environnement 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 Seche Environnement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and Seche Environnement.
Diversification Opportunities for Discover Financial and Seche Environnement
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Discover and Seche is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and Seche Environnement SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seche Environnement 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 Seche Environnement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seche Environnement has no effect on the direction of Discover Financial i.e., Discover Financial and Seche Environnement go up and down completely randomly.
Pair Corralation between Discover Financial and Seche Environnement
Assuming the 90 days trading horizon Discover Financial Services is expected to under-perform the Seche Environnement. In addition to that, Discover Financial is 1.6 times more volatile than Seche Environnement SA. It trades about -0.02 of its total potential returns per unit of risk. Seche Environnement SA is currently generating about 0.19 per unit of volatility. If you would invest 8,290 in Seche Environnement SA on December 4, 2024 and sell it today you would earn a total of 350.00 from holding Seche Environnement SA or generate 4.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Discover Financial Services vs. Seche Environnement SA
Performance |
| Timeline |
| Discover Financial |
| Seche Environnement |
Discover Financial and Seche Environnement Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Discover Financial and Seche Environnement
The main advantage of trading using opposite Discover Financial and Seche Environnement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, Seche Environnement 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 Seche Environnement will offset losses from the drop in Seche Environnement's long position.| Discover Financial vs. Beeks Trading | Discover Financial vs. Livermore Investments Group | Discover Financial vs. Young Cos Brewery | Discover Financial vs. Molson Coors Beverage |
| Seche Environnement vs. Wheaton Precious Metals | Seche Environnement vs. Litigation Capital Management | Seche Environnement vs. Coor Service Management | Seche Environnement vs. Impax Environmental Markets |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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