Correlation Between Discover Financial and LithiumBank Resources
Can any of the company-specific risk be diversified away by investing in both Discover Financial and LithiumBank Resources 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 LithiumBank Resources 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 LithiumBank Resources Corp, you can compare the effects of market volatilities on Discover Financial and LithiumBank Resources 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 LithiumBank Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and LithiumBank Resources.
Diversification Opportunities for Discover Financial and LithiumBank Resources
-0.84 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Discover and LithiumBank is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and LithiumBank Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LithiumBank Resources 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 LithiumBank Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LithiumBank Resources has no effect on the direction of Discover Financial i.e., Discover Financial and LithiumBank Resources go up and down completely randomly.
Pair Corralation between Discover Financial and LithiumBank Resources
Considering the 90-day investment horizon Discover Financial Services is expected to generate 0.59 times more return on investment than LithiumBank Resources. However, Discover Financial Services is 1.69 times less risky than LithiumBank Resources. It trades about 0.12 of its potential returns per unit of risk. LithiumBank Resources Corp is currently generating about -0.1 per unit of risk. If you would invest 9,281 in Discover Financial Services on August 29, 2024 and sell it today you would earn a total of 8,981 from holding Discover Financial Services or generate 96.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Discover Financial Services vs. LithiumBank Resources Corp
Performance |
| Timeline |
| Discover Financial |
| LithiumBank Resources |
Discover Financial and LithiumBank Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Discover Financial and LithiumBank Resources
The main advantage of trading using opposite Discover Financial and LithiumBank Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, LithiumBank Resources 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 LithiumBank Resources will offset losses from the drop in LithiumBank Resources' long position.| Discover Financial vs. Orix Corp Ads | Discover Financial vs. Medallion Financial Corp | Discover Financial vs. Oportun Financial Corp | Discover Financial vs. SLM Corp Pb |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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