Correlation Between Discover Financial and LendingClub
Can any of the company-specific risk be diversified away by investing in both Discover Financial and LendingClub 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 LendingClub 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 LendingClub, you can compare the effects of market volatilities on Discover Financial and LendingClub 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 LendingClub. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and LendingClub.
Diversification Opportunities for Discover Financial and LendingClub
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Discover and LendingClub is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and LendingClub in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LendingClub 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 LendingClub. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LendingClub has no effect on the direction of Discover Financial i.e., Discover Financial and LendingClub go up and down completely randomly.
Pair Corralation between Discover Financial and LendingClub
Assuming the 90 days horizon Discover Financial Services is expected to generate 1.21 times more return on investment than LendingClub. However, Discover Financial is 1.21 times more volatile than LendingClub. It trades about 0.27 of its potential returns per unit of risk. LendingClub is currently generating about 0.21 per unit of risk. If you would invest 13,790 in Discover Financial Services on September 5, 2024 and sell it today you would earn a total of 3,368 from holding Discover Financial Services or generate 24.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Discover Financial Services vs. LendingClub
Performance |
| Timeline |
| Discover Financial |
| LendingClub |
Discover Financial and LendingClub Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Discover Financial and LendingClub
The main advantage of trading using opposite Discover Financial and LendingClub positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, LendingClub 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 LendingClub will offset losses from the drop in LendingClub's long position.| Discover Financial vs. AUSTEVOLL SEAFOOD | Discover Financial vs. Natural Health Trends | Discover Financial vs. United Natural Foods | Discover Financial vs. FEMALE HEALTH |
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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