Correlation Between Discover Financial and Nippon Light
Can any of the company-specific risk be diversified away by investing in both Discover Financial and Nippon Light 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 Nippon Light 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 Nippon Light Metal, you can compare the effects of market volatilities on Discover Financial and Nippon Light 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 Nippon Light. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and Nippon Light.
Diversification Opportunities for Discover Financial and Nippon Light
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Discover and Nippon is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and Nippon Light Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Light Metal 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 Nippon Light. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Light Metal has no effect on the direction of Discover Financial i.e., Discover Financial and Nippon Light go up and down completely randomly.
Pair Corralation between Discover Financial and Nippon Light
Assuming the 90 days horizon Discover Financial Services is expected to generate 1.75 times more return on investment than Nippon Light. However, Discover Financial is 1.75 times more volatile than Nippon Light Metal. It trades about 0.17 of its potential returns per unit of risk. Nippon Light Metal is currently generating about -0.03 per unit of risk. If you would invest 12,416 in Discover Financial Services on November 2, 2024 and sell it today you would earn a total of 6,620 from holding Discover Financial Services or generate 53.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Discover Financial Services vs. Nippon Light Metal
Performance |
| Timeline |
| Discover Financial |
| Nippon Light Metal |
Discover Financial and Nippon Light Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Discover Financial and Nippon Light
The main advantage of trading using opposite Discover Financial and Nippon Light positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, Nippon Light 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 Nippon Light will offset losses from the drop in Nippon Light's long position.| Discover Financial vs. China Eastern Airlines | Discover Financial vs. SINGAPORE AIRLINES | Discover Financial vs. JAPAN AIRLINES | Discover Financial vs. PRECISION DRILLING P |
| Nippon Light vs. Molson Coors Beverage | Nippon Light vs. Fevertree Drinks PLC | Nippon Light vs. PLANT VEDA FOODS | Nippon Light vs. Suntory Beverage Food |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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