Correlation Between LION ONE and Discover Financial
Can any of the company-specific risk be diversified away by investing in both LION ONE 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 LION ONE and Discover Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LION ONE METALS and Discover Financial Services, you can compare the effects of market volatilities on LION ONE 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 LION ONE with a short position of Discover Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of LION ONE and Discover Financial.
Diversification Opportunities for LION ONE and Discover Financial
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between LION and Discover is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding LION ONE METALS and Discover Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discover Financial and LION ONE 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 LION ONE METALS 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 LION ONE i.e., LION ONE and Discover Financial go up and down completely randomly.
Pair Corralation between LION ONE and Discover Financial
Assuming the 90 days trading horizon LION ONE METALS is expected to under-perform the Discover Financial. But the stock apears to be less risky and, when comparing its historical volatility, LION ONE METALS is 1.22 times less risky than Discover Financial. The stock trades about -0.05 of its potential returns per unit of risk. The Discover Financial Services is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 14,027 in Discover Financial Services on September 1, 2024 and sell it today you would earn a total of 3,163 from holding Discover Financial Services or generate 22.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
LION ONE METALS vs. Discover Financial Services
Performance |
| Timeline |
| LION ONE METALS |
| Discover Financial |
LION ONE and Discover Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LION ONE and Discover Financial
The main advantage of trading using opposite LION ONE and Discover Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LION ONE 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.| LION ONE vs. Corporate Office Properties | LION ONE vs. Eagle Materials | LION ONE vs. Plastic Omnium | LION ONE vs. KENEDIX OFFICE INV |
| Discover Financial vs. Perseus Mining Limited | Discover Financial vs. Mobilezone Holding AG | Discover Financial vs. LION ONE METALS | Discover Financial vs. Harmony Gold Mining |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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