Correlation Between Discover Financial and Zip Co
Can any of the company-specific risk be diversified away by investing in both Discover Financial and Zip Co 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 Zip Co 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 Zip Co Limited, you can compare the effects of market volatilities on Discover Financial and Zip Co 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 Zip Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and Zip Co.
Diversification Opportunities for Discover Financial and Zip Co
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Discover and Zip is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and Zip Co Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zip Co Limited 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 Zip Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zip Co Limited has no effect on the direction of Discover Financial i.e., Discover Financial and Zip Co go up and down completely randomly.
Pair Corralation between Discover Financial and Zip Co
Considering the 90-day investment horizon Discover Financial Services is expected to generate 0.29 times more return on investment than Zip Co. However, Discover Financial Services is 3.4 times less risky than Zip Co. It trades about -0.12 of its potential returns per unit of risk. Zip Co Limited is currently generating about -0.07 per unit of risk. If you would invest 19,964 in Discover Financial Services on November 28, 2024 and sell it today you would lose (942.00) from holding Discover Financial Services or give up 4.72% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Discover Financial Services vs. Zip Co Limited
Performance |
| Timeline |
| Discover Financial |
| Zip Co Limited |
Discover Financial and Zip Co Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Discover Financial and Zip Co
The main advantage of trading using opposite Discover Financial and Zip Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, Zip Co 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 Zip Co will offset losses from the drop in Zip Co'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 |
| Zip Co vs. Cosmos Group Holdings | Zip Co vs. Regional Management Corp | Zip Co vs. Enova International | Zip Co vs. Open Lending Corp |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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