Correlation Between Credit Acceptance and Discover Financial
Can any of the company-specific risk be diversified away by investing in both Credit Acceptance 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 Credit Acceptance and Discover Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Credit Acceptance and Discover Financial Services, you can compare the effects of market volatilities on Credit Acceptance 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 Credit Acceptance with a short position of Discover Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Credit Acceptance and Discover Financial.
Diversification Opportunities for Credit Acceptance and Discover Financial
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Credit and Discover is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Credit Acceptance and Discover Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discover Financial and Credit Acceptance 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 Credit Acceptance 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 Credit Acceptance i.e., Credit Acceptance and Discover Financial go up and down completely randomly.
Pair Corralation between Credit Acceptance and Discover Financial
Assuming the 90 days trading horizon Credit Acceptance is expected to generate 1.98 times less return on investment than Discover Financial. But when comparing it to its historical volatility, Credit Acceptance is 1.61 times less risky than Discover Financial. It trades about 0.07 of its potential returns per unit of risk. Discover Financial Services is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 32,513 in Discover Financial Services on October 12, 2024 and sell it today you would earn a total of 9,320 from holding Discover Financial Services or generate 28.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Credit Acceptance vs. Discover Financial Services
Performance |
| Timeline |
| Credit Acceptance |
| Discover Financial |
Credit Acceptance and Discover Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Credit Acceptance and Discover Financial
The main advantage of trading using opposite Credit Acceptance and Discover Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Credit Acceptance 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.| Credit Acceptance vs. NXP Semiconductors NV | Credit Acceptance vs. British American Tobacco | Credit Acceptance vs. Charter Communications | Credit Acceptance vs. Clover Health Investments, |
| Discover Financial vs. Visa Inc | Discover Financial vs. Mastercard Incorporated | Discover Financial vs. American Express | Discover Financial vs. PayPal 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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