Correlation Between Catalyst Media and Discover Financial
Can any of the company-specific risk be diversified away by investing in both Catalyst Media 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 Catalyst Media and Discover Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Catalyst Media Group and Discover Financial Services, you can compare the effects of market volatilities on Catalyst Media 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 Catalyst Media with a short position of Discover Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Catalyst Media and Discover Financial.
Diversification Opportunities for Catalyst Media and Discover Financial
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Catalyst and Discover is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Catalyst Media Group and Discover Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discover Financial and Catalyst Media 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 Catalyst Media Group 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 Catalyst Media i.e., Catalyst Media and Discover Financial go up and down completely randomly.
Pair Corralation between Catalyst Media and Discover Financial
Assuming the 90 days trading horizon Catalyst Media is expected to generate 191.0 times less return on investment than Discover Financial. But when comparing it to its historical volatility, Catalyst Media Group is 1.32 times less risky than Discover Financial. It trades about 0.0 of its potential returns per unit of risk. Discover Financial Services is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 10,057 in Discover Financial Services on September 3, 2024 and sell it today you would earn a total of 8,186 from holding Discover Financial Services or generate 81.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.38% |
| Values | Daily Returns |
Catalyst Media Group vs. Discover Financial Services
Performance |
| Timeline |
| Catalyst Media Group |
| Discover Financial |
Catalyst Media and Discover Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Catalyst Media and Discover Financial
The main advantage of trading using opposite Catalyst Media and Discover Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Catalyst Media 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.| Catalyst Media vs. Smithson Investment Trust | Catalyst Media vs. Kinnevik Investment AB | Catalyst Media vs. New Residential Investment | Catalyst Media vs. The Mercantile Investment |
| Discover Financial vs. Catalyst Media Group | Discover Financial vs. CATLIN GROUP | Discover Financial vs. Magnora ASA | Discover Financial vs. RTW Venture Fund |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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