Correlation Between Discover Financial and Regional Management
Can any of the company-specific risk be diversified away by investing in both Discover Financial and Regional Management 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 Regional Management 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 Regional Management Corp, you can compare the effects of market volatilities on Discover Financial and Regional Management 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 Regional Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and Regional Management.
Diversification Opportunities for Discover Financial and Regional Management
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Discover and Regional is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and Regional Management Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regional Management 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 Regional Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regional Management Corp has no effect on the direction of Discover Financial i.e., Discover Financial and Regional Management go up and down completely randomly.
Pair Corralation between Discover Financial and Regional Management
Considering the 90-day investment horizon Discover Financial Services is expected to generate 0.85 times more return on investment than Regional Management. However, Discover Financial Services is 1.18 times less risky than Regional Management. It trades about 0.13 of its potential returns per unit of risk. Regional Management Corp is currently generating about 0.06 per unit of risk. If you would invest 8,408 in Discover Financial Services on September 1, 2024 and sell it today you would earn a total of 9,835 from holding Discover Financial Services or generate 116.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Discover Financial Services vs. Regional Management Corp
Performance |
| Timeline |
| Discover Financial |
| Regional Management Corp |
Discover Financial and Regional Management Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Discover Financial and Regional Management
The main advantage of trading using opposite Discover Financial and Regional Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, Regional Management 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 Regional Management will offset losses from the drop in Regional Management'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 |
| Regional Management vs. 360 Finance | Regional Management vs. Atlanticus Holdings | Regional Management vs. Qudian Inc | Regional Management vs. Enova International |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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