Correlation Between Discover Financial and SK Telecom
Can any of the company-specific risk be diversified away by investing in both Discover Financial and SK Telecom 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 SK Telecom 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 SK Telecom Co,, you can compare the effects of market volatilities on Discover Financial and SK Telecom 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 SK Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and SK Telecom.
Diversification Opportunities for Discover Financial and SK Telecom
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Discover and S1KM34 is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and SK Telecom Co, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SK Telecom Co, 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 SK Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SK Telecom Co, has no effect on the direction of Discover Financial i.e., Discover Financial and SK Telecom go up and down completely randomly.
Pair Corralation between Discover Financial and SK Telecom
Assuming the 90 days trading horizon Discover Financial is expected to generate 3.85 times less return on investment than SK Telecom. But when comparing it to its historical volatility, Discover Financial Services is 32.64 times less risky than SK Telecom. It trades about 0.16 of its potential returns per unit of risk. SK Telecom Co, is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 3,195 in SK Telecom Co, on October 11, 2024 and sell it today you would earn a total of 23.00 from holding SK Telecom Co, or generate 0.72% 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. SK Telecom Co,
Performance |
| Timeline |
| Discover Financial |
| SK Telecom Co, |
Discover Financial and SK Telecom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Discover Financial and SK Telecom
The main advantage of trading using opposite Discover Financial and SK Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, SK Telecom 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 SK Telecom will offset losses from the drop in SK Telecom's long position.| Discover Financial vs. Visa Inc | Discover Financial vs. Mastercard Incorporated | Discover Financial vs. American Express | Discover Financial vs. PayPal Holdings |
| SK Telecom vs. Capital One Financial | SK Telecom vs. Discover Financial Services | SK Telecom vs. Ryanair Holdings plc | SK Telecom vs. Citizens Financial Group, |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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