Correlation Between Discover Financial and Arrow Financial
Can any of the company-specific risk be diversified away by investing in both Discover Financial and Arrow 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 Discover Financial and Arrow Financial 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 Arrow Financial, you can compare the effects of market volatilities on Discover Financial and Arrow 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 Discover Financial with a short position of Arrow Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and Arrow Financial.
Diversification Opportunities for Discover Financial and Arrow Financial
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Discover and Arrow is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and Arrow Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Financial 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 Arrow Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Financial has no effect on the direction of Discover Financial i.e., Discover Financial and Arrow Financial go up and down completely randomly.
Pair Corralation between Discover Financial and Arrow Financial
Considering the 90-day investment horizon Discover Financial Services is expected to generate 1.0 times more return on investment than Arrow Financial. However, Discover Financial Services is 1.0 times less risky than Arrow Financial. It trades about 0.07 of its potential returns per unit of risk. Arrow Financial is currently generating about 0.02 per unit of risk. If you would invest 9,801 in Discover Financial Services on August 29, 2024 and sell it today you would earn a total of 8,455 from holding Discover Financial Services or generate 86.27% 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. Arrow Financial
Performance |
| Timeline |
| Discover Financial |
| Arrow Financial |
Discover Financial and Arrow Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Discover Financial and Arrow Financial
The main advantage of trading using opposite Discover Financial and Arrow Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, Arrow 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 Arrow Financial will offset losses from the drop in Arrow Financial's long position.| Discover Financial vs. Ally Financial | Discover Financial vs. Synchrony Financial | Discover Financial vs. Western Union Co | Discover Financial vs. Bread Financial Holdings |
| Arrow Financial vs. Heritage Commerce Corp | Arrow Financial vs. Westamerica Bancorporation | Arrow Financial vs. Heritage Financial | Arrow Financial vs. National Bankshares |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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