Correlation Between Discover Financial and PCI PAL
Can any of the company-specific risk be diversified away by investing in both Discover Financial and PCI PAL 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 PCI PAL 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 PCI PAL PLC, you can compare the effects of market volatilities on Discover Financial and PCI PAL 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 PCI PAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and PCI PAL.
Diversification Opportunities for Discover Financial and PCI PAL
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Discover and PCI is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and PCI PAL PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PCI PAL 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 PCI PAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PCI PAL PLC has no effect on the direction of Discover Financial i.e., Discover Financial and PCI PAL go up and down completely randomly.
Pair Corralation between Discover Financial and PCI PAL
Assuming the 90 days trading horizon Discover Financial Services is expected to generate 0.8 times more return on investment than PCI PAL. However, Discover Financial Services is 1.25 times less risky than PCI PAL. It trades about 0.06 of its potential returns per unit of risk. PCI PAL PLC is currently generating about 0.03 per unit of risk. If you would invest 10,566 in Discover Financial Services on October 14, 2024 and sell it today you would earn a total of 6,609 from holding Discover Financial Services or generate 62.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 96.39% |
| Values | Daily Returns |
Discover Financial Services vs. PCI PAL PLC
Performance |
| Timeline |
| Discover Financial |
| PCI PAL PLC |
Discover Financial and PCI PAL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Discover Financial and PCI PAL
The main advantage of trading using opposite Discover Financial and PCI PAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, PCI PAL 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 PCI PAL will offset losses from the drop in PCI PAL's long position.| Discover Financial vs. Walmart | Discover Financial vs. BYD Co | Discover Financial vs. Volkswagen AG | Discover Financial vs. Volkswagen AG Non Vtg |
| PCI PAL vs. Synchrony Financial | PCI PAL vs. Advanced Medical Solutions | PCI PAL vs. TBC Bank Group | PCI PAL vs. Discover Financial Services |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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