Correlation Between Discover Financial and Mr Cooper
Can any of the company-specific risk be diversified away by investing in both Discover Financial and Mr Cooper 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 Mr Cooper 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 Mr Cooper Group, you can compare the effects of market volatilities on Discover Financial and Mr Cooper 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 Mr Cooper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and Mr Cooper.
Diversification Opportunities for Discover Financial and Mr Cooper
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Discover and COOP is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and Mr Cooper Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mr Cooper Group 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 Mr Cooper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mr Cooper Group has no effect on the direction of Discover Financial i.e., Discover Financial and Mr Cooper go up and down completely randomly.
Pair Corralation between Discover Financial and Mr Cooper
Considering the 90-day investment horizon Discover Financial Services is expected to generate 2.71 times more return on investment than Mr Cooper. However, Discover Financial is 2.71 times more volatile than Mr Cooper Group. It trades about 0.2 of its potential returns per unit of risk. Mr Cooper Group is currently generating about 0.26 per unit of risk. If you would invest 15,226 in Discover Financial Services on August 27, 2024 and sell it today you would earn a total of 3,041 from holding Discover Financial Services or generate 19.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Discover Financial Services vs. Mr Cooper Group
Performance |
| Timeline |
| Discover Financial |
| Mr Cooper Group |
Discover Financial and Mr Cooper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Discover Financial and Mr Cooper
The main advantage of trading using opposite Discover Financial and Mr Cooper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, Mr Cooper 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 Mr Cooper will offset losses from the drop in Mr Cooper's long position.| Discover Financial vs. SLM Corp | Discover Financial vs. Orix Corp Ads | Discover Financial vs. FirstCash | Discover Financial vs. Medallion Financial Corp |
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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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