Correlation Between Induction Healthcare and Discover Financial
Can any of the company-specific risk be diversified away by investing in both Induction Healthcare 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 Induction Healthcare and Discover Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Induction Healthcare Group and Discover Financial Services, you can compare the effects of market volatilities on Induction Healthcare 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 Induction Healthcare with a short position of Discover Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Induction Healthcare and Discover Financial.
Diversification Opportunities for Induction Healthcare and Discover Financial
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Induction and Discover is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Induction Healthcare Group and Discover Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discover Financial and Induction Healthcare 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 Induction Healthcare Group 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 Induction Healthcare i.e., Induction Healthcare and Discover Financial go up and down completely randomly.
Pair Corralation between Induction Healthcare and Discover Financial
Assuming the 90 days trading horizon Induction Healthcare Group is expected to under-perform the Discover Financial. But the stock apears to be less risky and, when comparing its historical volatility, Induction Healthcare Group is 1.08 times less risky than Discover Financial. The stock trades about -0.29 of its potential returns per unit of risk. The Discover Financial Services is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 17,931 in Discover Financial Services on September 12, 2024 and sell it today you would lose (433.00) from holding Discover Financial Services or give up 2.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Induction Healthcare Group vs. Discover Financial Services
Performance |
| Timeline |
| Induction Healthcare |
| Discover Financial |
Induction Healthcare and Discover Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Induction Healthcare and Discover Financial
The main advantage of trading using opposite Induction Healthcare and Discover Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Induction Healthcare 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.| Induction Healthcare vs. Mulberry Group PLC | Induction Healthcare vs. Ikigai Ventures | Induction Healthcare vs. Neometals | Induction Healthcare vs. Coor Service Management |
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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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