Correlation Between Target Healthcare and Discover Financial
Can any of the company-specific risk be diversified away by investing in both Target 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 Target 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 Target Healthcare REIT and Discover Financial Services, you can compare the effects of market volatilities on Target 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 Target Healthcare with a short position of Discover Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Target Healthcare and Discover Financial.
Diversification Opportunities for Target Healthcare and Discover Financial
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Target and Discover is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Target Healthcare REIT and Discover Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discover Financial and Target 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 Target Healthcare REIT 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 Target Healthcare i.e., Target Healthcare and Discover Financial go up and down completely randomly.
Pair Corralation between Target Healthcare and Discover Financial
Assuming the 90 days trading horizon Target Healthcare is expected to generate 3.02 times less return on investment than Discover Financial. But when comparing it to its historical volatility, Target Healthcare REIT is 1.39 times less risky than Discover Financial. It trades about 0.03 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 10,905 in Discover Financial Services on August 31, 2024 and sell it today you would earn a total of 7,338 from holding Discover Financial Services or generate 67.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.88% |
| Values | Daily Returns |
Target Healthcare REIT vs. Discover Financial Services
Performance |
| Timeline |
| Target Healthcare REIT |
| Discover Financial |
Target Healthcare and Discover Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Target Healthcare and Discover Financial
The main advantage of trading using opposite Target Healthcare and Discover Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Target 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.| Target Healthcare vs. Westlake Chemical Corp | Target Healthcare vs. Zegona Communications Plc | Target Healthcare vs. Arrow Electronics | Target Healthcare vs. Air Products Chemicals |
| Discover Financial vs. Neometals | Discover Financial vs. Coor Service Management | Discover Financial vs. Aeorema Communications Plc | Discover Financial vs. JLEN Environmental Assets |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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