Correlation Between Discover Financial and Fevertree Drinks
Can any of the company-specific risk be diversified away by investing in both Discover Financial and Fevertree Drinks 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 Fevertree Drinks 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 Fevertree Drinks Plc, you can compare the effects of market volatilities on Discover Financial and Fevertree Drinks 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 Fevertree Drinks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and Fevertree Drinks.
Diversification Opportunities for Discover Financial and Fevertree Drinks
-0.82 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Discover and Fevertree is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and Fevertree Drinks Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fevertree Drinks Plc 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 Fevertree Drinks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fevertree Drinks Plc has no effect on the direction of Discover Financial i.e., Discover Financial and Fevertree Drinks go up and down completely randomly.
Pair Corralation between Discover Financial and Fevertree Drinks
Assuming the 90 days trading horizon Discover Financial Services is expected to generate 1.24 times more return on investment than Fevertree Drinks. However, Discover Financial is 1.24 times more volatile than Fevertree Drinks Plc. It trades about 0.14 of its potential returns per unit of risk. Fevertree Drinks Plc is currently generating about -0.15 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 6,034 from holding Discover Financial Services or generate 50.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 96.88% |
| Values | Daily Returns |
Discover Financial Services vs. Fevertree Drinks Plc
Performance |
| Timeline |
| Discover Financial |
| Fevertree Drinks Plc |
Discover Financial and Fevertree Drinks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Discover Financial and Fevertree Drinks
The main advantage of trading using opposite Discover Financial and Fevertree Drinks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, Fevertree Drinks 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 Fevertree Drinks will offset losses from the drop in Fevertree Drinks' 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 |
| Fevertree Drinks vs. Air Products Chemicals | Fevertree Drinks vs. Sabien Technology Group | Fevertree Drinks vs. Alfa Financial Software | Fevertree Drinks 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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