Correlation Between ONEOK and Discover Financial
Can any of the company-specific risk be diversified away by investing in both ONEOK 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 ONEOK and Discover Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ONEOK Inc and Discover Financial Services, you can compare the effects of market volatilities on ONEOK 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 ONEOK with a short position of Discover Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of ONEOK and Discover Financial.
Diversification Opportunities for ONEOK and Discover Financial
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between ONEOK and Discover is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding ONEOK Inc and Discover Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discover Financial and ONEOK 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 ONEOK Inc 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 ONEOK i.e., ONEOK and Discover Financial go up and down completely randomly.
Pair Corralation between ONEOK and Discover Financial
Assuming the 90 days trading horizon ONEOK Inc is expected to under-perform the Discover Financial. But the stock apears to be less risky and, when comparing its historical volatility, ONEOK Inc is 1.17 times less risky than Discover Financial. The stock trades about -0.1 of its potential returns per unit of risk. The Discover Financial Services is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 17,453 in Discover Financial Services on November 4, 2024 and sell it today you would earn a total of 2,705 from holding Discover Financial Services or generate 15.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 90.91% |
| Values | Daily Returns |
ONEOK Inc vs. Discover Financial Services
Performance |
| Timeline |
| ONEOK Inc |
| Discover Financial |
ONEOK and Discover Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ONEOK and Discover Financial
The main advantage of trading using opposite ONEOK and Discover Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ONEOK 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.| ONEOK vs. Universal Display Corp | ONEOK vs. Playtech Plc | ONEOK vs. Cairn Homes PLC | ONEOK vs. Cairo Communication SpA |
| Discover Financial vs. Regions Financial Corp | Discover Financial vs. Ecclesiastical Insurance Office | Discover Financial vs. TBC Bank Group | Discover Financial vs. Leroy Seafood 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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