Correlation Between Mastercard Incorporated and Discover Financial
Can any of the company-specific risk be diversified away by investing in both Mastercard Incorporated 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 Mastercard Incorporated and Discover Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mastercard Incorporated and Discover Financial Services, you can compare the effects of market volatilities on Mastercard Incorporated 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 Mastercard Incorporated with a short position of Discover Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mastercard Incorporated and Discover Financial.
Diversification Opportunities for Mastercard Incorporated and Discover Financial
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Mastercard and Discover is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard Incorporated and Discover Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discover Financial and Mastercard Incorporated 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 Mastercard Incorporated 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 Mastercard Incorporated i.e., Mastercard Incorporated and Discover Financial go up and down completely randomly.
Pair Corralation between Mastercard Incorporated and Discover Financial
Assuming the 90 days trading horizon Mastercard Incorporated is expected to generate 1.56 times less return on investment than Discover Financial. But when comparing it to its historical volatility, Mastercard Incorporated is 1.65 times less risky than Discover Financial. It trades about 0.08 of its potential returns per unit of risk. Discover Financial Services is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 28,332 in Discover Financial Services on October 27, 2024 and sell it today you would earn a total of 31,392 from holding Discover Financial Services or generate 110.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.79% |
| Values | Daily Returns |
Mastercard Incorporated vs. Discover Financial Services
Performance |
| Timeline |
| Mastercard Incorporated |
| Discover Financial |
Mastercard Incorporated and Discover Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mastercard Incorporated and Discover Financial
The main advantage of trading using opposite Mastercard Incorporated and Discover Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mastercard Incorporated 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.| Mastercard Incorporated vs. Chunghwa Telecom Co, | Mastercard Incorporated vs. Ryanair Holdings plc | Mastercard Incorporated vs. Cardinal Health, | Mastercard Incorporated vs. Healthpeak Properties |
| Discover Financial vs. Metalrgica Riosulense SA | Discover Financial vs. STAG Industrial, | Discover Financial vs. Nordon Indstrias Metalrgicas | Discover Financial vs. STMicroelectronics NV |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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