Correlation Between Discover Financial and Swedish Orphan
Can any of the company-specific risk be diversified away by investing in both Discover Financial and Swedish Orphan 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 Swedish Orphan 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 Swedish Orphan Biovitrum, you can compare the effects of market volatilities on Discover Financial and Swedish Orphan 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 Swedish Orphan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and Swedish Orphan.
Diversification Opportunities for Discover Financial and Swedish Orphan
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Discover and Swedish is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and Swedish Orphan Biovitrum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swedish Orphan Biovitrum 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 Swedish Orphan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swedish Orphan Biovitrum has no effect on the direction of Discover Financial i.e., Discover Financial and Swedish Orphan go up and down completely randomly.
Pair Corralation between Discover Financial and Swedish Orphan
Assuming the 90 days horizon Discover Financial Services is expected to generate 1.26 times more return on investment than Swedish Orphan. However, Discover Financial is 1.26 times more volatile than Swedish Orphan Biovitrum. It trades about 0.06 of its potential returns per unit of risk. Swedish Orphan Biovitrum is currently generating about 0.04 per unit of risk. If you would invest 10,242 in Discover Financial Services on October 30, 2024 and sell it today you would earn a total of 8,826 from holding Discover Financial Services or generate 86.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Discover Financial Services vs. Swedish Orphan Biovitrum
Performance |
| Timeline |
| Discover Financial |
| Swedish Orphan Biovitrum |
Discover Financial and Swedish Orphan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Discover Financial and Swedish Orphan
The main advantage of trading using opposite Discover Financial and Swedish Orphan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, Swedish Orphan 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 Swedish Orphan will offset losses from the drop in Swedish Orphan's long position.| Discover Financial vs. Visa Inc | Discover Financial vs. Mastercard | Discover Financial vs. PayPal Holdings |
| Swedish Orphan vs. Laureate Education | Swedish Orphan vs. CARDINAL HEALTH | Swedish Orphan vs. IDP EDUCATION LTD | Swedish Orphan vs. OPKO HEALTH |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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