Correlation Between Discover Financial and United Insurance
Can any of the company-specific risk be diversified away by investing in both Discover Financial and United Insurance 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 United Insurance 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 United Insurance Holdings, you can compare the effects of market volatilities on Discover Financial and United Insurance 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 United Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and United Insurance.
Diversification Opportunities for Discover Financial and United Insurance
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Discover and United is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and United Insurance Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Insurance Holdings 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 United Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Insurance Holdings has no effect on the direction of Discover Financial i.e., Discover Financial and United Insurance go up and down completely randomly.
Pair Corralation between Discover Financial and United Insurance
Assuming the 90 days horizon Discover Financial Services is expected to generate 0.68 times more return on investment than United Insurance. However, Discover Financial Services is 1.48 times less risky than United Insurance. It trades about -0.04 of its potential returns per unit of risk. United Insurance Holdings is currently generating about -0.19 per unit of risk. If you would invest 16,642 in Discover Financial Services on October 17, 2024 and sell it today you would lose (194.00) from holding Discover Financial Services or give up 1.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 94.44% |
| Values | Daily Returns |
Discover Financial Services vs. United Insurance Holdings
Performance |
| Timeline |
| Discover Financial |
| United Insurance Holdings |
Discover Financial and United Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Discover Financial and United Insurance
The main advantage of trading using opposite Discover Financial and United Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, United Insurance 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 United Insurance will offset losses from the drop in United Insurance's long position.| Discover Financial vs. Peijia Medical Limited | Discover Financial vs. PICKN PAY STORES | Discover Financial vs. CHINA TONTINE WINES | Discover Financial vs. PEPTONIC MEDICAL |
| United Insurance vs. PLANT VEDA FOODS | United Insurance vs. Tyson Foods | United Insurance vs. MagnaChip Semiconductor Corp | United Insurance vs. NXP Semiconductors NV |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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