Correlation Between Freedom Bank and Discover Financial
Can any of the company-specific risk be diversified away by investing in both Freedom Bank 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 Freedom Bank and Discover Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Freedom Bank of and Discover Financial Services, you can compare the effects of market volatilities on Freedom Bank 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 Freedom Bank with a short position of Discover Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freedom Bank and Discover Financial.
Diversification Opportunities for Freedom Bank and Discover Financial
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Freedom and Discover is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Freedom Bank of and Discover Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discover Financial and Freedom Bank 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 Freedom Bank of 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 Freedom Bank i.e., Freedom Bank and Discover Financial go up and down completely randomly.
Pair Corralation between Freedom Bank and Discover Financial
Given the investment horizon of 90 days Freedom Bank of is expected to under-perform the Discover Financial. But the otc stock apears to be less risky and, when comparing its historical volatility, Freedom Bank of is 7.9 times less risky than Discover Financial. The otc stock trades about -0.03 of its potential returns per unit of risk. The Discover Financial Services is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 14,457 in Discover Financial Services on August 24, 2024 and sell it today you would earn a total of 3,034 from holding Discover Financial Services or generate 20.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Freedom Bank of vs. Discover Financial Services
Performance |
| Timeline |
| Freedom Bank |
| Discover Financial |
Freedom Bank and Discover Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Freedom Bank and Discover Financial
The main advantage of trading using opposite Freedom Bank and Discover Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freedom Bank 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.| Freedom Bank vs. Invesco High Income | Freedom Bank vs. Blackrock Muniholdings Ny | Freedom Bank vs. MFS Investment Grade | Freedom Bank vs. Federated Premier Municipal |
| Discover Financial vs. Ally Financial | Discover Financial vs. Synchrony Financial | Discover Financial vs. Western Union Co | Discover Financial vs. Bread Financial 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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