Correlation Between Discover Financial and Residential Secure
Can any of the company-specific risk be diversified away by investing in both Discover Financial and Residential Secure 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 Residential Secure 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 Residential Secure Income, you can compare the effects of market volatilities on Discover Financial and Residential Secure 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 Residential Secure. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and Residential Secure.
Diversification Opportunities for Discover Financial and Residential Secure
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Discover and Residential is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and Residential Secure Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Residential Secure Income 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 Residential Secure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Residential Secure Income has no effect on the direction of Discover Financial i.e., Discover Financial and Residential Secure go up and down completely randomly.
Pair Corralation between Discover Financial and Residential Secure
Assuming the 90 days trading horizon Discover Financial Services is expected to generate 0.94 times more return on investment than Residential Secure. However, Discover Financial Services is 1.06 times less risky than Residential Secure. It trades about 0.04 of its potential returns per unit of risk. Residential Secure Income is currently generating about 0.03 per unit of risk. If you would invest 17,614 in Discover Financial Services on September 14, 2024 and sell it today you would earn a total of 166.00 from holding Discover Financial Services or generate 0.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Discover Financial Services vs. Residential Secure Income
Performance |
| Timeline |
| Discover Financial |
| Residential Secure Income |
Discover Financial and Residential Secure Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Discover Financial and Residential Secure
The main advantage of trading using opposite Discover Financial and Residential Secure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, Residential Secure 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 Residential Secure will offset losses from the drop in Residential Secure'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 |
| Residential Secure vs. Discover Financial Services | Residential Secure vs. Royal Bank of | Residential Secure vs. Regions Financial Corp | Residential Secure vs. Vienna Insurance Group |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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