Correlation Between Discover Financial and HUMANA

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Can any of the company-specific risk be diversified away by investing in both Discover Financial and HUMANA 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 HUMANA 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 HUMANA INC, you can compare the effects of market volatilities on Discover Financial and HUMANA 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 HUMANA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and HUMANA.

Diversification Opportunities for Discover Financial and HUMANA

-0.29
  Correlation Coefficient

Very good diversification

The 3 months correlation between Discover and HUMANA is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and HUMANA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUMANA INC 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 HUMANA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HUMANA INC has no effect on the direction of Discover Financial i.e., Discover Financial and HUMANA go up and down completely randomly.

Pair Corralation between Discover Financial and HUMANA

Considering the 90-day investment horizon Discover Financial Services is expected to generate 1.07 times more return on investment than HUMANA. However, Discover Financial is 1.07 times more volatile than HUMANA INC. It trades about 0.04 of its potential returns per unit of risk. HUMANA INC is currently generating about -0.19 per unit of risk. If you would invest  17,252  in Discover Financial Services on September 19, 2024 and sell it today you would earn a total of  136.00  from holding Discover Financial Services or generate 0.79% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy95.45%
ValuesDaily Returns

Discover Financial Services  vs.  HUMANA INC

 Performance 
       Timeline  
Discover Financial 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Discover Financial Services are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal technical and fundamental indicators, Discover Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.
HUMANA INC 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days HUMANA INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for HUMANA INC investors.

Discover Financial and HUMANA Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Discover Financial and HUMANA

The main advantage of trading using opposite Discover Financial and HUMANA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, HUMANA 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 HUMANA will offset losses from the drop in HUMANA's long position.
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The idea behind Discover Financial Services and HUMANA INC pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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