Correlation Between Discover Financial and NorAm Drilling
Can any of the company-specific risk be diversified away by investing in both Discover Financial and NorAm Drilling 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 NorAm Drilling 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 NorAm Drilling AS, you can compare the effects of market volatilities on Discover Financial and NorAm Drilling 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 NorAm Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and NorAm Drilling.
Diversification Opportunities for Discover Financial and NorAm Drilling
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Discover and NorAm is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and NorAm Drilling AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NorAm Drilling AS 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 NorAm Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NorAm Drilling AS has no effect on the direction of Discover Financial i.e., Discover Financial and NorAm Drilling go up and down completely randomly.
Pair Corralation between Discover Financial and NorAm Drilling
Assuming the 90 days horizon Discover Financial is expected to generate 1.45 times less return on investment than NorAm Drilling. But when comparing it to its historical volatility, Discover Financial Services is 5.01 times less risky than NorAm Drilling. It trades about 0.13 of its potential returns per unit of risk. NorAm Drilling AS is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 284.00 in NorAm Drilling AS on October 12, 2024 and sell it today you would earn a total of 3.00 from holding NorAm Drilling AS or generate 1.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 94.44% |
| Values | Daily Returns |
Discover Financial Services vs. NorAm Drilling AS
Performance |
| Timeline |
| Discover Financial |
| NorAm Drilling AS |
Discover Financial and NorAm Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Discover Financial and NorAm Drilling
The main advantage of trading using opposite Discover Financial and NorAm Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, NorAm Drilling 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 NorAm Drilling will offset losses from the drop in NorAm Drilling's long position.| Discover Financial vs. Platinum Investment Management | Discover Financial vs. Sims Metal Management | Discover Financial vs. Brockhaus Capital Management | Discover Financial vs. British American Tobacco |
| NorAm Drilling vs. SPORT LISBOA E | NorAm Drilling vs. Marie Brizard Wine | NorAm Drilling vs. Gaztransport Technigaz SA | NorAm Drilling vs. Air Transport Services |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
Other Complementary Tools
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk |