Correlation Between Waste Management and Discover Financial
Can any of the company-specific risk be diversified away by investing in both Waste Management 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 Waste Management and Discover Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Waste Management and Discover Financial Services, you can compare the effects of market volatilities on Waste Management 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 Waste Management with a short position of Discover Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waste Management and Discover Financial.
Diversification Opportunities for Waste Management and Discover Financial
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Waste and Discover is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and Discover Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discover Financial and Waste Management 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 Waste Management 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 Waste Management i.e., Waste Management and Discover Financial go up and down completely randomly.
Pair Corralation between Waste Management and Discover Financial
Assuming the 90 days trading horizon Waste Management is expected to under-perform the Discover Financial. But the stock apears to be less risky and, when comparing its historical volatility, Waste Management is 1.81 times less risky than Discover Financial. The stock trades about -0.07 of its potential returns per unit of risk. The Discover Financial Services is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 17,388 in Discover Financial Services on October 19, 2024 and sell it today you would earn a total of 1,405 from holding Discover Financial Services or generate 8.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 93.02% |
| Values | Daily Returns |
Waste Management vs. Discover Financial Services
Performance |
| Timeline |
| Waste Management |
| Discover Financial |
Waste Management and Discover Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Waste Management and Discover Financial
The main advantage of trading using opposite Waste Management and Discover Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waste Management 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.| Waste Management vs. Sligro Food Group | Waste Management vs. Grieg Seafood | Waste Management vs. Discover Financial Services | Waste Management vs. Metro Bank PLC |
| Discover Financial vs. Metals Exploration Plc | Discover Financial vs. Jupiter Fund Management | Discover Financial vs. Thor Mining PLC | Discover Financial vs. Waste Management |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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