Correlation Between Discover Financial and Apple
Can any of the company-specific risk be diversified away by investing in both Discover Financial and Apple 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 Discover Financial and Apple into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Discover Financial Services and Apple Inc, you can compare the effects of market volatilities on Discover Financial and Apple 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 Discover Financial with a short position of Apple. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and Apple.
Diversification Opportunities for Discover Financial and Apple
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Discover and Apple is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc and Discover 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 Discover Financial Services are associated (or correlated) with Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc has no effect on the direction of Discover Financial i.e., Discover Financial and Apple go up and down completely randomly.
Pair Corralation between Discover Financial and Apple
Assuming the 90 days trading horizon Discover Financial Services is expected to generate 3.32 times more return on investment than Apple. However, Discover Financial is 3.32 times more volatile than Apple Inc. It trades about 0.24 of its potential returns per unit of risk. Apple Inc is currently generating about -0.13 per unit of risk. If you would invest 41,833 in Discover Financial Services on October 14, 2024 and sell it today you would earn a total of 10,107 from holding Discover Financial Services or generate 24.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Discover Financial Services vs. Apple Inc
Performance |
| Timeline |
| Discover Financial |
| Apple Inc |
Discover Financial and Apple Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Discover Financial and Apple
The main advantage of trading using opposite Discover Financial and Apple positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, Apple 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 Apple will offset losses from the drop in Apple's long position.| Discover Financial vs. Visa Inc | Discover Financial vs. Mastercard Incorporated | Discover Financial vs. American Express | Discover Financial vs. PayPal Holdings |
| Apple vs. Discover Financial Services | Apple vs. DXC Technology | Apple vs. Micron Technology | Apple vs. Cognizant Technology Solutions |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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