Correlation Between Discover Financial and Anglo Eastern
Can any of the company-specific risk be diversified away by investing in both Discover Financial and Anglo Eastern 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 Anglo Eastern 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 Anglo Eastern Plantations PLC, you can compare the effects of market volatilities on Discover Financial and Anglo Eastern 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 Anglo Eastern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and Anglo Eastern.
Diversification Opportunities for Discover Financial and Anglo Eastern
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Discover and Anglo is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and Anglo Eastern Plantations PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anglo Eastern Planta 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 Anglo Eastern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anglo Eastern Planta has no effect on the direction of Discover Financial i.e., Discover Financial and Anglo Eastern go up and down completely randomly.
Pair Corralation between Discover Financial and Anglo Eastern
Assuming the 90 days trading horizon Discover Financial Services is expected to generate 1.82 times more return on investment than Anglo Eastern. However, Discover Financial is 1.82 times more volatile than Anglo Eastern Plantations PLC. It trades about 0.15 of its potential returns per unit of risk. Anglo Eastern Plantations PLC is currently generating about 0.02 per unit of risk. If you would invest 11,980 in Discover Financial Services on September 3, 2024 and sell it today you would earn a total of 6,263 from holding Discover Financial Services or generate 52.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 96.88% |
| Values | Daily Returns |
Discover Financial Services vs. Anglo Eastern Plantations PLC
Performance |
| Timeline |
| Discover Financial |
| Anglo Eastern Planta |
Discover Financial and Anglo Eastern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Discover Financial and Anglo Eastern
The main advantage of trading using opposite Discover Financial and Anglo Eastern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, Anglo Eastern 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 Anglo Eastern will offset losses from the drop in Anglo Eastern's long position.| Discover Financial vs. Catalyst Media Group | Discover Financial vs. CATLIN GROUP | Discover Financial vs. RTW Venture Fund | Discover Financial vs. Secure Property Development |
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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 Global Correlations module to find global opportunities by holding instruments from different markets.
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