Correlation Between Discover Financial and Food Culture
Can any of the company-specific risk be diversified away by investing in both Discover Financial and Food Culture 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 Food Culture 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 Food Culture, you can compare the effects of market volatilities on Discover Financial and Food Culture 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 Food Culture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and Food Culture.
Diversification Opportunities for Discover Financial and Food Culture
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Discover and Food is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and Food Culture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Food Culture 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 Food Culture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Food Culture has no effect on the direction of Discover Financial i.e., Discover Financial and Food Culture go up and down completely randomly.
Pair Corralation between Discover Financial and Food Culture
Considering the 90-day investment horizon Discover Financial is expected to generate 31465.44 times less return on investment than Food Culture. But when comparing it to its historical volatility, Discover Financial Services is 105.41 times less risky than Food Culture. It trades about 0.0 of its potential returns per unit of risk. Food Culture is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 2.80 in Food Culture on September 13, 2024 and sell it today you would earn a total of 22.20 from holding Food Culture or generate 792.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Discover Financial Services vs. Food Culture
Performance |
| Timeline |
| Discover Financial |
| Food Culture |
Discover Financial and Food Culture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Discover Financial and Food Culture
The main advantage of trading using opposite Discover Financial and Food Culture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, Food Culture 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 Food Culture will offset losses from the drop in Food Culture'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 |
| Food Culture vs. Paysafe | Food Culture vs. Diageo PLC ADR | Food Culture vs. Uber Technologies | Food Culture vs. Molson Coors Brewing |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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