Correlation Between Discover Financial and Atacado SA
Can any of the company-specific risk be diversified away by investing in both Discover Financial and Atacado SA 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 Atacado SA 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 Atacado SA, you can compare the effects of market volatilities on Discover Financial and Atacado SA 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 Atacado SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and Atacado SA.
Diversification Opportunities for Discover Financial and Atacado SA
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Discover and Atacado is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and Atacado SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atacado SA 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 Atacado SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atacado SA has no effect on the direction of Discover Financial i.e., Discover Financial and Atacado SA go up and down completely randomly.
Pair Corralation between Discover Financial and Atacado SA
Considering the 90-day investment horizon Discover Financial Services is expected to generate 48.16 times more return on investment than Atacado SA. However, Discover Financial is 48.16 times more volatile than Atacado SA. It trades about 0.07 of its potential returns per unit of risk. Atacado SA is currently generating about 0.12 per unit of risk. If you would invest 9,223 in Discover Financial Services on September 12, 2024 and sell it today you would earn a total of 8,352 from holding Discover Financial Services or generate 90.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 27.47% |
| Values | Daily Returns |
Discover Financial Services vs. Atacado SA
Performance |
| Timeline |
| Discover Financial |
| Atacado SA |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Discover Financial and Atacado SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Discover Financial and Atacado SA
The main advantage of trading using opposite Discover Financial and Atacado SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, Atacado SA 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 Atacado SA will offset losses from the drop in Atacado SA's long position.| Discover Financial vs. Victory Integrity Smallmid Cap | Discover Financial vs. Hilton Worldwide Holdings | Discover Financial vs. NVIDIA | Discover Financial vs. JPMorgan Chase Co |
| Atacado SA vs. Freedom Bank of | Atacado SA vs. Zhihu Inc ADR | Atacado SA vs. Discover Financial Services | Atacado SA vs. CDW 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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