Correlation Between Discover Financial and Arrow Electronics
Can any of the company-specific risk be diversified away by investing in both Discover Financial and Arrow Electronics 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 Arrow Electronics 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 Arrow Electronics, you can compare the effects of market volatilities on Discover Financial and Arrow Electronics 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 Arrow Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and Arrow Electronics.
Diversification Opportunities for Discover Financial and Arrow Electronics
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Discover and Arrow is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and Arrow Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Electronics 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 Arrow Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Electronics has no effect on the direction of Discover Financial i.e., Discover Financial and Arrow Electronics go up and down completely randomly.
Pair Corralation between Discover Financial and Arrow Electronics
Assuming the 90 days horizon Discover Financial Services is expected to generate 1.55 times more return on investment than Arrow Electronics. However, Discover Financial is 1.55 times more volatile than Arrow Electronics. It trades about 0.12 of its potential returns per unit of risk. Arrow Electronics is currently generating about 0.01 per unit of risk. If you would invest 7,956 in Discover Financial Services on October 30, 2024 and sell it today you would earn a total of 11,112 from holding Discover Financial Services or generate 139.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Discover Financial Services vs. Arrow Electronics
Performance |
| Timeline |
| Discover Financial |
| Arrow Electronics |
Discover Financial and Arrow Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Discover Financial and Arrow Electronics
The main advantage of trading using opposite Discover Financial and Arrow Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, Arrow Electronics 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 Arrow Electronics will offset losses from the drop in Arrow Electronics' long position.| Discover Financial vs. Visa Inc | Discover Financial vs. Mastercard | Discover Financial vs. PayPal Holdings |
| Arrow Electronics vs. DICKER DATA LTD | Arrow Electronics vs. Esprinet SpA | Arrow Electronics vs. Wayside Technology Group | Arrow Electronics vs. FORTEC Elektronik AG |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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