Correlation Between Discover Financial and Pentair Plc
Can any of the company-specific risk be diversified away by investing in both Discover Financial and Pentair Plc 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 Pentair Plc 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 Pentair plc, you can compare the effects of market volatilities on Discover Financial and Pentair Plc 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 Pentair Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and Pentair Plc.
Diversification Opportunities for Discover Financial and Pentair Plc
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Discover and Pentair is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and Pentair plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair plc 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 Pentair Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pentair plc has no effect on the direction of Discover Financial i.e., Discover Financial and Pentair Plc go up and down completely randomly.
Pair Corralation between Discover Financial and Pentair Plc
Assuming the 90 days horizon Discover Financial Services is expected to under-perform the Pentair Plc. In addition to that, Discover Financial is 1.53 times more volatile than Pentair plc. It trades about -0.04 of its total potential returns per unit of risk. Pentair plc is currently generating about 0.16 per unit of volatility. If you would invest 9,894 in Pentair plc on September 13, 2024 and sell it today you would earn a total of 326.00 from holding Pentair plc or generate 3.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Discover Financial Services vs. Pentair plc
Performance |
| Timeline |
| Discover Financial |
| Pentair plc |
Discover Financial and Pentair Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Discover Financial and Pentair Plc
The main advantage of trading using opposite Discover Financial and Pentair Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, Pentair Plc 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 Pentair Plc will offset losses from the drop in Pentair Plc's long position.| Discover Financial vs. Pentair plc | Discover Financial vs. HF SINCLAIR P | Discover Financial vs. Air New Zealand | Discover Financial vs. WIZZ AIR HLDGUNSPADR4 |
| Pentair Plc vs. Schneider Electric SE | Pentair Plc vs. Superior Plus Corp | Pentair Plc vs. SIVERS SEMICONDUCTORS AB | Pentair Plc vs. Norsk Hydro ASA |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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