Correlation Between Discover Financial and SoFi Technologies
Can any of the company-specific risk be diversified away by investing in both Discover Financial and SoFi Technologies 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 SoFi Technologies 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 SoFi Technologies, you can compare the effects of market volatilities on Discover Financial and SoFi Technologies 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 SoFi Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and SoFi Technologies.
Diversification Opportunities for Discover Financial and SoFi Technologies
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Discover and SoFi is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and SoFi Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SoFi Technologies 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 SoFi Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SoFi Technologies has no effect on the direction of Discover Financial i.e., Discover Financial and SoFi Technologies go up and down completely randomly.
Pair Corralation between Discover Financial and SoFi Technologies
Considering the 90-day investment horizon Discover Financial is expected to generate 2.46 times less return on investment than SoFi Technologies. In addition to that, Discover Financial is 1.05 times more volatile than SoFi Technologies. It trades about 0.18 of its total potential returns per unit of risk. SoFi Technologies is currently generating about 0.47 per unit of volatility. If you would invest 786.00 in SoFi Technologies on August 30, 2024 and sell it today you would earn a total of 763.00 from holding SoFi Technologies or generate 97.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 97.73% |
| Values | Daily Returns |
Discover Financial Services vs. SoFi Technologies
Performance |
| Timeline |
| Discover Financial |
| SoFi Technologies |
Discover Financial and SoFi Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Discover Financial and SoFi Technologies
The main advantage of trading using opposite Discover Financial and SoFi Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, SoFi Technologies 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 SoFi Technologies will offset losses from the drop in SoFi Technologies' long position.| Discover Financial vs. 360 Finance | Discover Financial vs. Atlanticus Holdings | Discover Financial vs. X Financial Class | Discover Financial vs. Yirendai |
| SoFi Technologies vs. Upstart Holdings | SoFi Technologies vs. Affirm Holdings | SoFi Technologies vs. Lucid Group | SoFi Technologies vs. Palantir Technologies Class |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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