Correlation Between BYD and Discover Financial
Can any of the company-specific risk be diversified away by investing in both BYD 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 BYD and Discover Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BYD Co and Discover Financial Services, you can compare the effects of market volatilities on BYD 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 BYD with a short position of Discover Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of BYD and Discover Financial.
Diversification Opportunities for BYD and Discover Financial
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BYD and Discover is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding BYD Co and Discover Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discover Financial and BYD 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 BYD Co 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 BYD i.e., BYD and Discover Financial go up and down completely randomly.
Pair Corralation between BYD and Discover Financial
Assuming the 90 days trading horizon BYD is expected to generate 4.99 times less return on investment than Discover Financial. In addition to that, BYD is 2.6 times more volatile than Discover Financial Services. It trades about 0.03 of its total potential returns per unit of risk. Discover Financial Services is currently generating about 0.34 per unit of volatility. If you would invest 17,540 in Discover Financial Services on October 28, 2024 and sell it today you would earn a total of 2,507 from holding Discover Financial Services or generate 14.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 90.48% |
| Values | Daily Returns |
BYD Co vs. Discover Financial Services
Performance |
| Timeline |
| BYD Co |
| Discover Financial |
BYD and Discover Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BYD and Discover Financial
The main advantage of trading using opposite BYD and Discover Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BYD 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.| BYD vs. Raytheon Technologies Corp | BYD vs. SMA Solar Technology | BYD vs. Vienna Insurance Group | BYD vs. Allianz Technology Trust |
| Discover Financial vs. Berkshire Hathaway | Discover Financial vs. Samsung Electronics Co | Discover Financial vs. Samsung Electronics Co | Discover Financial vs. Chocoladefabriken Lindt Spruengli |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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