Correlation Between Discover Financial and Xeros Technology
Can any of the company-specific risk be diversified away by investing in both Discover Financial and Xeros Technology 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 Xeros Technology 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 Xeros Technology Group, you can compare the effects of market volatilities on Discover Financial and Xeros Technology 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 Xeros Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and Xeros Technology.
Diversification Opportunities for Discover Financial and Xeros Technology
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Discover and Xeros is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and Xeros Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xeros Technology 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 Xeros Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xeros Technology has no effect on the direction of Discover Financial i.e., Discover Financial and Xeros Technology go up and down completely randomly.
Pair Corralation between Discover Financial and Xeros Technology
Assuming the 90 days trading horizon Discover Financial Services is expected to generate 0.5 times more return on investment than Xeros Technology. However, Discover Financial Services is 2.01 times less risky than Xeros Technology. It trades about 0.06 of its potential returns per unit of risk. Xeros Technology Group is currently generating about -0.07 per unit of risk. If you would invest 11,042 in Discover Financial Services on October 19, 2024 and sell it today you would earn a total of 7,751 from holding Discover Financial Services or generate 70.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 96.39% |
| Values | Daily Returns |
Discover Financial Services vs. Xeros Technology Group
Performance |
| Timeline |
| Discover Financial |
| Xeros Technology |
Discover Financial and Xeros Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Discover Financial and Xeros Technology
The main advantage of trading using opposite Discover Financial and Xeros Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, Xeros Technology 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 Xeros Technology will offset losses from the drop in Xeros Technology's long position.| Discover Financial vs. Metals Exploration Plc | Discover Financial vs. Jupiter Fund Management | Discover Financial vs. Thor Mining PLC | Discover Financial vs. Waste Management |
| Xeros Technology vs. Micron Technology | Xeros Technology vs. PureTech Health plc | Xeros Technology vs. JLEN Environmental Assets | Xeros Technology vs. Made Tech 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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