Correlation Between Discover Financial and KB Financial
Can any of the company-specific risk be diversified away by investing in both Discover Financial and KB 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 Discover Financial and KB Financial 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 KB Financial Group, you can compare the effects of market volatilities on Discover Financial and KB 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 Discover Financial with a short position of KB Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and KB Financial.
Diversification Opportunities for Discover Financial and KB Financial
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Discover and K1BF34 is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and KB Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KB Financial Group 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 KB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KB Financial Group has no effect on the direction of Discover Financial i.e., Discover Financial and KB Financial go up and down completely randomly.
Pair Corralation between Discover Financial and KB Financial
Assuming the 90 days trading horizon Discover Financial Services is expected to generate 4.06 times more return on investment than KB Financial. However, Discover Financial is 4.06 times more volatile than KB Financial Group. It trades about 0.33 of its potential returns per unit of risk. KB Financial Group is currently generating about 0.21 per unit of risk. If you would invest 41,833 in Discover Financial Services on October 25, 2024 and sell it today you would earn a total of 15,602 from holding Discover Financial Services or generate 37.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Discover Financial Services vs. KB Financial Group
Performance |
| Timeline |
| Discover Financial |
| KB Financial Group |
Discover Financial and KB Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Discover Financial and KB Financial
The main advantage of trading using opposite Discover Financial and KB Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, KB 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 KB Financial will offset losses from the drop in KB Financial's long position.| Discover Financial vs. Align Technology | Discover Financial vs. Martin Marietta Materials, | Discover Financial vs. Delta Air Lines | Discover Financial vs. Palantir Technologies |
| KB Financial vs. Clover Health Investments, | KB Financial vs. Liberty Broadband | KB Financial vs. Ameriprise Financial | KB Financial vs. Discover Financial Services |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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