Correlation Between Yirendai and Discover Financial
Can any of the company-specific risk be diversified away by investing in both Yirendai 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 Yirendai and Discover Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Yirendai and Discover Financial Services, you can compare the effects of market volatilities on Yirendai 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 Yirendai with a short position of Discover Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yirendai and Discover Financial.
Diversification Opportunities for Yirendai and Discover Financial
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Yirendai and Discover is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Yirendai and Discover Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discover Financial and Yirendai 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 Yirendai 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 Yirendai i.e., Yirendai and Discover Financial go up and down completely randomly.
Pair Corralation between Yirendai and Discover Financial
Considering the 90-day investment horizon Yirendai is expected to under-perform the Discover Financial. In addition to that, Yirendai is 1.33 times more volatile than Discover Financial Services. It trades about -0.07 of its total potential returns per unit of risk. Discover Financial Services is currently generating about 0.21 per unit of volatility. If you would invest 15,069 in Discover Financial Services on September 2, 2024 and sell it today you would earn a total of 3,174 from holding Discover Financial Services or generate 21.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Yirendai vs. Discover Financial Services
Performance |
| Timeline |
| Yirendai |
| Discover Financial |
Yirendai and Discover Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Yirendai and Discover Financial
The main advantage of trading using opposite Yirendai and Discover Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yirendai 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.| Yirendai vs. Lexinfintech Holdings | Yirendai vs. FinVolution Group | Yirendai vs. 360 Finance | Yirendai vs. Navient Corp |
| Discover Financial vs. Ally Financial | Discover Financial vs. Synchrony Financial | Discover Financial vs. Western Union Co | Discover Financial vs. Bread Financial Holdings |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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