Correlation Between Discover Financial and SLM Corp
Can any of the company-specific risk be diversified away by investing in both Discover Financial and SLM 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 SLM 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 SLM Corp Pb, you can compare the effects of market volatilities on Discover Financial and SLM 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 SLM Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and SLM Corp.
Diversification Opportunities for Discover Financial and SLM Corp
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Discover and SLM is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and SLM Corp Pb in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SLM Corp Pb 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 SLM Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SLM Corp Pb has no effect on the direction of Discover Financial i.e., Discover Financial and SLM Corp go up and down completely randomly.
Pair Corralation between Discover Financial and SLM Corp
Considering the 90-day investment horizon Discover Financial Services is expected to generate 2.73 times more return on investment than SLM Corp. However, Discover Financial is 2.73 times more volatile than SLM Corp Pb. It trades about 0.09 of its potential returns per unit of risk. SLM Corp Pb is currently generating about 0.13 per unit of risk. If you would invest 8,851 in Discover Financial Services on August 26, 2024 and sell it today you would earn a total of 9,078 from holding Discover Financial Services or generate 102.56% 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. SLM Corp Pb
Performance |
| Timeline |
| Discover Financial |
| SLM Corp Pb |
Discover Financial and SLM Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Discover Financial and SLM Corp
The main advantage of trading using opposite Discover Financial and SLM Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, SLM 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 SLM Corp will offset losses from the drop in SLM Corp'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 |
| SLM Corp vs. Associates First Capital | SLM Corp vs. Federal Agricultural Mortgage | SLM Corp vs. Federal Agricultural Mortgage | SLM Corp vs. Federal Agricultural Mortgage |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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