Correlation Between Discover Financial and X FAB
Can any of the company-specific risk be diversified away by investing in both Discover Financial and X FAB 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 X FAB 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 X FAB Silicon Foundries, you can compare the effects of market volatilities on Discover Financial and X FAB 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 X FAB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and X FAB.
Diversification Opportunities for Discover Financial and X FAB
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Discover and XFB is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and X FAB Silicon Foundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X FAB Silicon 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 X FAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of X FAB Silicon has no effect on the direction of Discover Financial i.e., Discover Financial and X FAB go up and down completely randomly.
Pair Corralation between Discover Financial and X FAB
Assuming the 90 days horizon Discover Financial Services is expected to generate 0.89 times more return on investment than X FAB. However, Discover Financial Services is 1.13 times less risky than X FAB. It trades about 0.12 of its potential returns per unit of risk. X FAB Silicon Foundries is currently generating about -0.01 per unit of risk. If you would invest 12,942 in Discover Financial Services on October 25, 2024 and sell it today you would earn a total of 5,190 from holding Discover Financial Services or generate 40.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Discover Financial Services vs. X FAB Silicon Foundries
Performance |
| Timeline |
| Discover Financial |
| X FAB Silicon |
Discover Financial and X FAB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Discover Financial and X FAB
The main advantage of trading using opposite Discover Financial and X FAB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, X FAB 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 X FAB will offset losses from the drop in X FAB's long position.| Discover Financial vs. ANGANG STEEL H | Discover Financial vs. CVR Medical Corp | Discover Financial vs. MAANSHAN IRON H | Discover Financial vs. Inspire Medical Systems |
| X FAB vs. KINGBOARD CHEMICAL | X FAB vs. SILICON LABORATOR | X FAB vs. CHEMICAL INDUSTRIES | X FAB vs. X FAB Silicon Foundries |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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