Correlation Between Baker Steel and Discover Financial
Can any of the company-specific risk be diversified away by investing in both Baker Steel 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 Baker Steel and Discover Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baker Steel Resources and Discover Financial Services, you can compare the effects of market volatilities on Baker Steel 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 Baker Steel with a short position of Discover Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baker Steel and Discover Financial.
Diversification Opportunities for Baker Steel and Discover Financial
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Baker and Discover is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Baker Steel Resources and Discover Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discover Financial and Baker Steel 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 Baker Steel Resources 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 Baker Steel i.e., Baker Steel and Discover Financial go up and down completely randomly.
Pair Corralation between Baker Steel and Discover Financial
Assuming the 90 days trading horizon Baker Steel is expected to generate 8.16 times less return on investment than Discover Financial. In addition to that, Baker Steel is 1.09 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 0.27 per unit of volatility. If you would invest 17,056 in Discover Financial Services on October 20, 2024 and sell it today you would earn a total of 1,737 from holding Discover Financial Services or generate 10.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.0% |
| Values | Daily Returns |
Baker Steel Resources vs. Discover Financial Services
Performance |
| Timeline |
| Baker Steel Resources |
| Discover Financial |
Baker Steel and Discover Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baker Steel and Discover Financial
The main advantage of trading using opposite Baker Steel and Discover Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baker Steel 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.| Baker Steel vs. Sabre Insurance Group | Baker Steel vs. AMG Advanced Metallurgical | Baker Steel vs. Wheaton Precious Metals | Baker Steel vs. Central Asia Metals |
| Discover Financial vs. Lundin Mining Corp | Discover Financial vs. Griffin Mining | Discover Financial vs. Invesco Physical Silver | Discover Financial vs. Blackrock World Mining |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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