Correlation Between Discover Financial and UNIVERSAL MUSIC
Can any of the company-specific risk be diversified away by investing in both Discover Financial and UNIVERSAL MUSIC 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 UNIVERSAL MUSIC 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 UNIVERSAL MUSIC GROUP, you can compare the effects of market volatilities on Discover Financial and UNIVERSAL MUSIC 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 UNIVERSAL MUSIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and UNIVERSAL MUSIC.
Diversification Opportunities for Discover Financial and UNIVERSAL MUSIC
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Discover and UNIVERSAL is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and UNIVERSAL MUSIC GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNIVERSAL MUSIC 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 UNIVERSAL MUSIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNIVERSAL MUSIC GROUP has no effect on the direction of Discover Financial i.e., Discover Financial and UNIVERSAL MUSIC go up and down completely randomly.
Pair Corralation between Discover Financial and UNIVERSAL MUSIC
Assuming the 90 days horizon Discover Financial Services is expected to generate 1.96 times more return on investment than UNIVERSAL MUSIC. However, Discover Financial is 1.96 times more volatile than UNIVERSAL MUSIC GROUP. It trades about 0.24 of its potential returns per unit of risk. UNIVERSAL MUSIC GROUP is currently generating about -0.02 per unit of risk. If you would invest 16,780 in Discover Financial Services on October 25, 2024 and sell it today you would earn a total of 1,352 from holding Discover Financial Services or generate 8.06% 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. UNIVERSAL MUSIC GROUP
Performance |
| Timeline |
| Discover Financial |
| UNIVERSAL MUSIC GROUP |
Discover Financial and UNIVERSAL MUSIC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Discover Financial and UNIVERSAL MUSIC
The main advantage of trading using opposite Discover Financial and UNIVERSAL MUSIC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, UNIVERSAL MUSIC 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 UNIVERSAL MUSIC will offset losses from the drop in UNIVERSAL MUSIC's long position.| Discover Financial vs. ANGANG STEEL H | Discover Financial vs. CVR Medical Corp | Discover Financial vs. MAANSHAN IRON H | Discover Financial vs. Inspire Medical Systems |
| UNIVERSAL MUSIC vs. BJs Wholesale Club | UNIVERSAL MUSIC vs. Fast Retailing Co | UNIVERSAL MUSIC vs. PICKN PAY STORES | UNIVERSAL MUSIC vs. Vienna Insurance 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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