Correlation Between Discover Financial and FinVolution
Can any of the company-specific risk be diversified away by investing in both Discover Financial and FinVolution 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 FinVolution 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 FinVolution Group, you can compare the effects of market volatilities on Discover Financial and FinVolution 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 FinVolution. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and FinVolution.
Diversification Opportunities for Discover Financial and FinVolution
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Discover and FinVolution is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and FinVolution Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FinVolution 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 FinVolution. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FinVolution Group has no effect on the direction of Discover Financial i.e., Discover Financial and FinVolution go up and down completely randomly.
Pair Corralation between Discover Financial and FinVolution
Considering the 90-day investment horizon Discover Financial Services is expected to generate 1.22 times more return on investment than FinVolution. However, Discover Financial is 1.22 times more volatile than FinVolution Group. It trades about 0.12 of its potential returns per unit of risk. FinVolution Group is currently generating about 0.08 per unit of risk. If you would invest 10,337 in Discover Financial Services on August 28, 2024 and sell it today you would earn a total of 7,930 from holding Discover Financial Services or generate 76.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Discover Financial Services vs. FinVolution Group
Performance |
| Timeline |
| Discover Financial |
| FinVolution Group |
Discover Financial and FinVolution Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Discover Financial and FinVolution
The main advantage of trading using opposite Discover Financial and FinVolution positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, FinVolution 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 FinVolution will offset losses from the drop in FinVolution's long position.| Discover Financial vs. SLM Corp | Discover Financial vs. Orix Corp Ads | Discover Financial vs. FirstCash | Discover Financial vs. Medallion Financial Corp |
| FinVolution vs. SLM Corp | FinVolution vs. Orix Corp Ads | FinVolution vs. FirstCash | FinVolution vs. Medallion Financial 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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