Correlation Between Discover Financial and AIR PRODCHEMICALS
Can any of the company-specific risk be diversified away by investing in both Discover Financial and AIR PRODCHEMICALS 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 AIR PRODCHEMICALS 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 AIR PRODCHEMICALS, you can compare the effects of market volatilities on Discover Financial and AIR PRODCHEMICALS 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 AIR PRODCHEMICALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and AIR PRODCHEMICALS.
Diversification Opportunities for Discover Financial and AIR PRODCHEMICALS
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Discover and AIR is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and AIR PRODCHEMICALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIR PRODCHEMICALS 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 AIR PRODCHEMICALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIR PRODCHEMICALS has no effect on the direction of Discover Financial i.e., Discover Financial and AIR PRODCHEMICALS go up and down completely randomly.
Pair Corralation between Discover Financial and AIR PRODCHEMICALS
Assuming the 90 days horizon Discover Financial Services is expected to generate 1.68 times more return on investment than AIR PRODCHEMICALS. However, Discover Financial is 1.68 times more volatile than AIR PRODCHEMICALS. It trades about 0.36 of its potential returns per unit of risk. AIR PRODCHEMICALS is currently generating about 0.49 per unit of risk. If you would invest 16,594 in Discover Financial Services on October 30, 2024 and sell it today you would earn a total of 2,474 from holding Discover Financial Services or generate 14.91% 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. AIR PRODCHEMICALS
Performance |
| Timeline |
| Discover Financial |
| AIR PRODCHEMICALS |
Discover Financial and AIR PRODCHEMICALS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Discover Financial and AIR PRODCHEMICALS
The main advantage of trading using opposite Discover Financial and AIR PRODCHEMICALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, AIR PRODCHEMICALS 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 AIR PRODCHEMICALS will offset losses from the drop in AIR PRODCHEMICALS's long position.| Discover Financial vs. Visa Inc | Discover Financial vs. Mastercard | Discover Financial vs. PayPal Holdings |
| AIR PRODCHEMICALS vs. Apple Inc | AIR PRODCHEMICALS vs. Apple Inc | AIR PRODCHEMICALS vs. Apple Inc | AIR PRODCHEMICALS vs. Apple Inc |
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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