Correlation Between Discover Financial and Lloyds Banking
Can any of the company-specific risk be diversified away by investing in both Discover Financial and Lloyds Banking 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 Lloyds Banking 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 Lloyds Banking Group, you can compare the effects of market volatilities on Discover Financial and Lloyds Banking 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 Lloyds Banking. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and Lloyds Banking.
Diversification Opportunities for Discover Financial and Lloyds Banking
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Discover and Lloyds is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and Lloyds Banking Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lloyds Banking Group 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 Lloyds Banking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lloyds Banking Group has no effect on the direction of Discover Financial i.e., Discover Financial and Lloyds Banking go up and down completely randomly.
Pair Corralation between Discover Financial and Lloyds Banking
Assuming the 90 days trading horizon Discover Financial Services is expected to generate 6.02 times more return on investment than Lloyds Banking. However, Discover Financial is 6.02 times more volatile than Lloyds Banking Group. It trades about 0.14 of its potential returns per unit of risk. Lloyds Banking Group is currently generating about 0.15 per unit of risk. If you would invest 8,459 in Discover Financial Services on September 14, 2024 and sell it today you would earn a total of 9,158 from holding Discover Financial Services or generate 108.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.43% |
| Values | Daily Returns |
Discover Financial Services vs. Lloyds Banking Group
Performance |
| Timeline |
| Discover Financial |
| Lloyds Banking Group |
Discover Financial and Lloyds Banking Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Discover Financial and Lloyds Banking
The main advantage of trading using opposite Discover Financial and Lloyds Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, Lloyds Banking 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 Lloyds Banking will offset losses from the drop in Lloyds Banking's long position.| Discover Financial vs. Dolly Varden Silver | Discover Financial vs. Ironveld Plc | Discover Financial vs. Baker Steel Resources | Discover Financial vs. Endeavour Mining Corp |
| Lloyds Banking vs. Liontrust Asset Management | Lloyds Banking vs. Erste Group Bank | Lloyds Banking vs. Smithson Investment Trust | Lloyds Banking vs. Aberdeen Diversified Income |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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