Correlation Between European Metals and Discover Financial
Can any of the company-specific risk be diversified away by investing in both European Metals and Discover Financial 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 European Metals and Discover Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between European Metals Holdings and Discover Financial Services, you can compare the effects of market volatilities on European Metals and Discover Financial 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 European Metals with a short position of Discover Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Metals and Discover Financial.
Diversification Opportunities for European Metals and Discover Financial
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between European and Discover is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding European Metals Holdings and Discover Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discover Financial and European Metals 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 European Metals Holdings are associated (or correlated) with Discover Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Discover Financial has no effect on the direction of European Metals i.e., European Metals and Discover Financial go up and down completely randomly.
Pair Corralation between European Metals and Discover Financial
Assuming the 90 days trading horizon European Metals Holdings is expected to generate 2.08 times more return on investment than Discover Financial. However, European Metals is 2.08 times more volatile than Discover Financial Services. It trades about 0.3 of its potential returns per unit of risk. Discover Financial Services is currently generating about -0.08 per unit of risk. If you would invest 700.00 in European Metals Holdings on October 15, 2024 and sell it today you would earn a total of 125.00 from holding European Metals Holdings or generate 17.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 94.44% |
| Values | Daily Returns |
European Metals Holdings vs. Discover Financial Services
Performance |
| Timeline |
| European Metals Holdings |
| Discover Financial |
European Metals and Discover Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with European Metals and Discover Financial
The main advantage of trading using opposite European Metals and Discover Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Metals position performs unexpectedly, Discover Financial 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 Discover Financial will offset losses from the drop in Discover Financial's long position.| European Metals vs. DFS Furniture PLC | European Metals vs. Spirent Communications plc | European Metals vs. Synthomer plc | European Metals vs. Universal Display Corp |
| Discover Financial vs. National Beverage Corp | Discover Financial vs. Molson Coors Beverage | Discover Financial vs. Bloomsbury Publishing Plc | Discover Financial vs. European Metals Holdings |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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