Correlation Between Arrow Financial and Discover Financial
Can any of the company-specific risk be diversified away by investing in both Arrow Financial 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 Arrow Financial and Discover Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arrow Financial and Discover Financial Services, you can compare the effects of market volatilities on Arrow Financial 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 Arrow Financial with a short position of Discover Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arrow Financial and Discover Financial.
Diversification Opportunities for Arrow Financial and Discover Financial
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Arrow and Discover is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Financial and Discover Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discover Financial and Arrow 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 Arrow Financial 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 Arrow Financial i.e., Arrow Financial and Discover Financial go up and down completely randomly.
Pair Corralation between Arrow Financial and Discover Financial
Given the investment horizon of 90 days Arrow Financial is expected to generate 3.25 times less return on investment than Discover Financial. In addition to that, Arrow Financial is 1.0 times more volatile than Discover Financial Services. It trades about 0.02 of its total potential returns per unit of risk. Discover Financial Services is currently generating about 0.07 per unit of volatility. If you would invest 9,801 in Discover Financial Services on August 29, 2024 and sell it today you would earn a total of 8,455 from holding Discover Financial Services or generate 86.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arrow Financial vs. Discover Financial Services
Performance |
| Timeline |
| Arrow Financial |
| Discover Financial |
Arrow Financial and Discover Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arrow Financial and Discover Financial
The main advantage of trading using opposite Arrow Financial and Discover Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arrow Financial 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.| Arrow Financial vs. Heritage Commerce Corp | Arrow Financial vs. Westamerica Bancorporation | Arrow Financial vs. Heritage Financial | Arrow Financial vs. National Bankshares |
| Discover Financial vs. Ally Financial | Discover Financial vs. Synchrony Financial | Discover Financial vs. Western Union Co | Discover Financial vs. Bread Financial Holdings |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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