Correlation Between Discover Financial and Palantir Technologies
Can any of the company-specific risk be diversified away by investing in both Discover Financial and Palantir Technologies 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 Palantir Technologies 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 Palantir Technologies, you can compare the effects of market volatilities on Discover Financial and Palantir Technologies 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 Palantir Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and Palantir Technologies.
Diversification Opportunities for Discover Financial and Palantir Technologies
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Discover and Palantir is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and Palantir Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palantir Technologies 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 Palantir Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palantir Technologies has no effect on the direction of Discover Financial i.e., Discover Financial and Palantir Technologies go up and down completely randomly.
Pair Corralation between Discover Financial and Palantir Technologies
Assuming the 90 days trading horizon Discover Financial Services is expected to generate 1.42 times more return on investment than Palantir Technologies. However, Discover Financial is 1.42 times more volatile than Palantir Technologies. It trades about 0.34 of its potential returns per unit of risk. Palantir Technologies is currently generating about 0.16 per unit of risk. If you would invest 41,833 in Discover Financial Services on November 6, 2024 and sell it today you would earn a total of 17,747 from holding Discover Financial Services or generate 42.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Discover Financial Services vs. Palantir Technologies
Performance |
| Timeline |
| Discover Financial |
| Palantir Technologies |
Discover Financial and Palantir Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Discover Financial and Palantir Technologies
The main advantage of trading using opposite Discover Financial and Palantir Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, Palantir Technologies 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 Palantir Technologies will offset losses from the drop in Palantir Technologies' long position.| Discover Financial vs. Visa Inc | Discover Financial vs. Mastercard Incorporated | Discover Financial vs. American Express | Discover Financial vs. PayPal Holdings |
| Palantir Technologies vs. Deutsche Bank Aktiengesellschaft | Palantir Technologies vs. Truist Financial | Palantir Technologies vs. Verizon Communications | Palantir Technologies vs. CRISPR Therapeutics AG |
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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