Correlation Between Discover Financial and Medallion Financial
Can any of the company-specific risk be diversified away by investing in both Discover Financial and Medallion Financial 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 Medallion Financial 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 Medallion Financial Corp, you can compare the effects of market volatilities on Discover Financial and Medallion Financial 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 Medallion Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and Medallion Financial.
Diversification Opportunities for Discover Financial and Medallion Financial
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Discover and Medallion is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and Medallion Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medallion Financial Corp 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 Medallion Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medallion Financial Corp has no effect on the direction of Discover Financial i.e., Discover Financial and Medallion Financial go up and down completely randomly.
Pair Corralation between Discover Financial and Medallion Financial
Considering the 90-day investment horizon Discover Financial Services is expected to generate 0.91 times more return on investment than Medallion Financial. However, Discover Financial Services is 1.1 times less risky than Medallion Financial. It trades about 0.14 of its potential returns per unit of risk. Medallion Financial Corp is currently generating about 0.06 per unit of risk. If you would invest 7,976 in Discover Financial Services on August 26, 2024 and sell it today you would earn a total of 9,953 from holding Discover Financial Services or generate 124.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Discover Financial Services vs. Medallion Financial Corp
Performance |
| Timeline |
| Discover Financial |
| Medallion Financial Corp |
Discover Financial and Medallion Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Discover Financial and Medallion Financial
The main advantage of trading using opposite Discover Financial and Medallion Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, Medallion Financial 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 Medallion Financial will offset losses from the drop in Medallion Financial'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 |
| Medallion Financial vs. Midland States Bancorp | Medallion Financial vs. Western New England | Medallion Financial vs. Merchants Bancorp | Medallion Financial vs. MidWestOne Financial Group |
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 Stocks Directory module to find actively traded stocks across global markets.
Other Complementary Tools
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Transaction History View history of all your transactions and understand their impact on performance |