Correlation Between CNFinance Holdings and Discover Financial
Can any of the company-specific risk be diversified away by investing in both CNFinance Holdings 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 CNFinance Holdings and Discover Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CNFinance Holdings and Discover Financial Services, you can compare the effects of market volatilities on CNFinance Holdings 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 CNFinance Holdings with a short position of Discover Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of CNFinance Holdings and Discover Financial.
Diversification Opportunities for CNFinance Holdings and Discover Financial
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between CNFinance and Discover is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding CNFinance Holdings and Discover Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discover Financial and CNFinance Holdings 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 CNFinance Holdings 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 CNFinance Holdings i.e., CNFinance Holdings and Discover Financial go up and down completely randomly.
Pair Corralation between CNFinance Holdings and Discover Financial
Considering the 90-day investment horizon CNFinance Holdings is expected to generate 2.97 times more return on investment than Discover Financial. However, CNFinance Holdings is 2.97 times more volatile than Discover Financial Services. It trades about 0.25 of its potential returns per unit of risk. Discover Financial Services is currently generating about 0.41 per unit of risk. If you would invest 95.00 in CNFinance Holdings on November 1, 2024 and sell it today you would earn a total of 28.00 from holding CNFinance Holdings or generate 29.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.0% |
| Values | Daily Returns |
CNFinance Holdings vs. Discover Financial Services
Performance |
| Timeline |
| CNFinance Holdings |
| Discover Financial |
CNFinance Holdings and Discover Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CNFinance Holdings and Discover Financial
The main advantage of trading using opposite CNFinance Holdings and Discover Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CNFinance Holdings 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.| CNFinance Holdings vs. Guild Holdings Co | CNFinance Holdings vs. PennyMac Finl Svcs | CNFinance Holdings vs. Security National Financial | CNFinance Holdings vs. Encore Capital Group |
| 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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