Correlation Between Extra Space and Discover Financial
Can any of the company-specific risk be diversified away by investing in both Extra Space and Discover Financial 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 Extra Space and Discover Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Extra Space Storage and Discover Financial Services, you can compare the effects of market volatilities on Extra Space and Discover Financial 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 Extra Space with a short position of Discover Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extra Space and Discover Financial.
Diversification Opportunities for Extra Space and Discover Financial
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Extra and Discover is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Extra Space Storage and Discover Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discover Financial and Extra Space 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 Extra Space Storage are associated (or correlated) with Discover Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Discover Financial has no effect on the direction of Extra Space i.e., Extra Space and Discover Financial go up and down completely randomly.
Pair Corralation between Extra Space and Discover Financial
Assuming the 90 days trading horizon Extra Space is expected to generate 6.54 times less return on investment than Discover Financial. But when comparing it to its historical volatility, Extra Space Storage is 1.44 times less risky than Discover Financial. It trades about 0.02 of its potential returns per unit of risk. Discover Financial Services is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 10,660 in Discover Financial Services on September 14, 2024 and sell it today you would earn a total of 7,120 from holding Discover Financial Services or generate 66.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 97.99% |
| Values | Daily Returns |
Extra Space Storage vs. Discover Financial Services
Performance |
| Timeline |
| Extra Space Storage |
| Discover Financial |
Extra Space and Discover Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Extra Space and Discover Financial
The main advantage of trading using opposite Extra Space and Discover Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extra Space position performs unexpectedly, Discover Financial 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 Discover Financial will offset losses from the drop in Discover Financial's long position.| Extra Space vs. Ross Stores | Extra Space vs. Bisichi Mining PLC | Extra Space vs. Hochschild Mining plc | Extra Space vs. AMG Advanced Metallurgical |
| Discover Financial vs. Dolly Varden Silver | Discover Financial vs. Ironveld Plc | Discover Financial vs. Baker Steel Resources | Discover Financial vs. Endeavour Mining Corp |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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