Correlation Between NH Foods and Discover Financial
Can any of the company-specific risk be diversified away by investing in both NH Foods 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 NH Foods and Discover Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NH Foods Ltd and Discover Financial Services, you can compare the effects of market volatilities on NH Foods 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 NH Foods with a short position of Discover Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of NH Foods and Discover Financial.
Diversification Opportunities for NH Foods and Discover Financial
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between NIPMY and Discover is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding NH Foods Ltd and Discover Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discover Financial and NH Foods 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 NH Foods Ltd 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 NH Foods i.e., NH Foods and Discover Financial go up and down completely randomly.
Pair Corralation between NH Foods and Discover Financial
Assuming the 90 days horizon NH Foods is expected to generate 4.81 times less return on investment than Discover Financial. But when comparing it to its historical volatility, NH Foods Ltd is 5.16 times less risky than Discover Financial. It trades about 0.07 of its potential returns per unit of risk. Discover Financial Services is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 11,213 in Discover Financial Services on August 28, 2024 and sell it today you would earn a total of 7,054 from holding Discover Financial Services or generate 62.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 99.72% |
| Values | Daily Returns |
NH Foods Ltd vs. Discover Financial Services
Performance |
| Timeline |
| NH Foods |
| Discover Financial |
NH Foods and Discover Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NH Foods and Discover Financial
The main advantage of trading using opposite NH Foods and Discover Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NH Foods 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 NH Foods Ltd 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.| Discover Financial vs. Orix Corp Ads | Discover Financial vs. Medallion Financial Corp | Discover Financial vs. Oportun Financial Corp | Discover Financial vs. SLM Corp Pb |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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