Correlation Between Hartford Financial and Discover Financial
Can any of the company-specific risk be diversified away by investing in both Hartford Financial 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 Hartford Financial and Discover Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Hartford Financial and Discover Financial Services, you can compare the effects of market volatilities on Hartford Financial 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 Hartford Financial with a short position of Discover Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hartford Financial and Discover Financial.
Diversification Opportunities for Hartford Financial and Discover Financial
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Hartford and Discover is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding The Hartford Financial and Discover Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discover Financial and Hartford 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 The Hartford Financial 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 Hartford Financial i.e., Hartford Financial and Discover Financial go up and down completely randomly.
Pair Corralation between Hartford Financial and Discover Financial
If you would invest 41,833 in Discover Financial Services on October 30, 2024 and sell it today you would earn a total of 17,891 from holding Discover Financial Services or generate 42.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Hartford Financial vs. Discover Financial Services
Performance |
| Timeline |
| The Hartford Financial |
| Discover Financial |
Hartford Financial and Discover Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hartford Financial and Discover Financial
The main advantage of trading using opposite Hartford Financial and Discover Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hartford Financial 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.The idea behind The Hartford Financial and Discover Financial Services 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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