Correlation Between Discover Financial and Singapore Telecommunicatio
Can any of the company-specific risk be diversified away by investing in both Discover Financial and Singapore Telecommunicatio 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 Singapore Telecommunicatio 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 Singapore Telecommunications Limited, you can compare the effects of market volatilities on Discover Financial and Singapore Telecommunicatio 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 Singapore Telecommunicatio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and Singapore Telecommunicatio.
Diversification Opportunities for Discover Financial and Singapore Telecommunicatio
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Discover and Singapore is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and Singapore Telecommunications L in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Singapore Telecommunicatio 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 Singapore Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Singapore Telecommunicatio has no effect on the direction of Discover Financial i.e., Discover Financial and Singapore Telecommunicatio go up and down completely randomly.
Pair Corralation between Discover Financial and Singapore Telecommunicatio
Assuming the 90 days horizon Discover Financial Services is expected to generate 1.25 times more return on investment than Singapore Telecommunicatio. However, Discover Financial is 1.25 times more volatile than Singapore Telecommunications Limited. It trades about 0.17 of its potential returns per unit of risk. Singapore Telecommunications Limited is currently generating about 0.04 per unit of risk. If you would invest 17,190 in Discover Financial Services on October 30, 2024 and sell it today you would earn a total of 1,878 from holding Discover Financial Services or generate 10.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Discover Financial Services vs. Singapore Telecommunications L
Performance |
| Timeline |
| Discover Financial |
| Singapore Telecommunicatio |
Discover Financial and Singapore Telecommunicatio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Discover Financial and Singapore Telecommunicatio
The main advantage of trading using opposite Discover Financial and Singapore Telecommunicatio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, Singapore Telecommunicatio 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 Singapore Telecommunicatio will offset losses from the drop in Singapore Telecommunicatio's long position.| Discover Financial vs. Visa Inc | Discover Financial vs. Mastercard | Discover Financial vs. PayPal Holdings |
| Singapore Telecommunicatio vs. T Mobile | Singapore Telecommunicatio vs. China Mobile Limited | Singapore Telecommunicatio vs. Verizon Communications | Singapore Telecommunicatio vs. ATT 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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