Correlation Between DFS Furniture and Discover Financial
Can any of the company-specific risk be diversified away by investing in both DFS Furniture and Discover Financial 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 DFS Furniture and Discover Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DFS Furniture PLC and Discover Financial Services, you can compare the effects of market volatilities on DFS Furniture and Discover Financial 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 DFS Furniture with a short position of Discover Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of DFS Furniture and Discover Financial.
Diversification Opportunities for DFS Furniture and Discover Financial
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between DFS and Discover is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding DFS Furniture PLC and Discover Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discover Financial and DFS Furniture 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 DFS Furniture PLC are associated (or correlated) with Discover Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Discover Financial has no effect on the direction of DFS Furniture i.e., DFS Furniture and Discover Financial go up and down completely randomly.
Pair Corralation between DFS Furniture and Discover Financial
Assuming the 90 days trading horizon DFS Furniture PLC is expected to generate 1.65 times more return on investment than Discover Financial. However, DFS Furniture is 1.65 times more volatile than Discover Financial Services. It trades about 0.25 of its potential returns per unit of risk. Discover Financial Services is currently generating about 0.04 per unit of risk. If you would invest 12,900 in DFS Furniture PLC on September 14, 2024 and sell it today you would earn a total of 1,500 from holding DFS Furniture PLC or generate 11.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
DFS Furniture PLC vs. Discover Financial Services
Performance |
| Timeline |
| DFS Furniture PLC |
| Discover Financial |
DFS Furniture and Discover Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DFS Furniture and Discover Financial
The main advantage of trading using opposite DFS Furniture and Discover Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DFS Furniture position performs unexpectedly, Discover Financial 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 Discover Financial will offset losses from the drop in Discover Financial's long position.| DFS Furniture vs. Discover Financial Services | DFS Furniture vs. Take Two Interactive Software | DFS Furniture vs. Alfa Financial Software | DFS Furniture vs. OneSavings Bank PLC |
| Discover Financial vs. Dolly Varden Silver | Discover Financial vs. Ironveld Plc | Discover Financial vs. Baker Steel Resources | Discover Financial vs. Endeavour Mining Corp |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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