Correlation Between Discover Financial and Navient Corp
Can any of the company-specific risk be diversified away by investing in both Discover Financial and Navient Corp 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 Navient Corp 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 Navient Corp, you can compare the effects of market volatilities on Discover Financial and Navient Corp 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 Navient Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and Navient Corp.
Diversification Opportunities for Discover Financial and Navient Corp
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Discover and Navient is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and Navient Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Navient 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 Navient Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Navient Corp has no effect on the direction of Discover Financial i.e., Discover Financial and Navient Corp go up and down completely randomly.
Pair Corralation between Discover Financial and Navient Corp
Considering the 90-day investment horizon Discover Financial Services is expected to generate 1.6 times more return on investment than Navient Corp. However, Discover Financial is 1.6 times more volatile than Navient Corp. It trades about 0.18 of its potential returns per unit of risk. Navient Corp is currently generating about -0.04 per unit of risk. If you would invest 14,545 in Discover Financial Services on August 23, 2024 and sell it today you would earn a total of 2,732 from holding Discover Financial Services or generate 18.78% 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. Navient Corp
Performance |
| Timeline |
| Discover Financial |
| Navient Corp |
Discover Financial and Navient Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Discover Financial and Navient Corp
The main advantage of trading using opposite Discover Financial and Navient Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, Navient Corp 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 Navient Corp will offset losses from the drop in Navient Corp's long position.| Discover Financial vs. Small Cap Core | Discover Financial vs. Morningstar Unconstrained Allocation | Discover Financial vs. Mutual Of America | Discover Financial vs. Ep Emerging Markets |
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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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