Correlation Between Discover Financial and Energy Transfer

Can any of the company-specific risk be diversified away by investing in both Discover Financial and Energy Transfer 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 Discover Financial and Energy Transfer into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Discover Financial Services and Energy Transfer Equity, you can compare the effects of market volatilities on Discover Financial and Energy Transfer 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 Discover Financial with a short position of Energy Transfer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and Energy Transfer.

Diversification Opportunities for Discover Financial and Energy Transfer

0.0

Correlation Coefficient

Discover Financial  Energy Transfer

Pay attention - limited upside

The 3 months correlation between Discover and Energy is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and Energy Transfer Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Transfer Equity and Discover Financial 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 Discover Financial Services are associated (or correlated) with Energy Transfer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Transfer Equity has no effect on the direction of Discover Financial i.e., Discover Financial and Energy Transfer go up and down completely randomly.

Pair Corralation between Discover Financial and Energy Transfer

If you would invest (100.00) in Energy Transfer Equity on January 30, 2024 and sell it today you would earn a total of  100.00  from holding Energy Transfer Equity or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Discover Financial Services  vs.  Energy Transfer Equity

Discover Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Discover Financial Services are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Discover Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Energy Transfer Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Energy Transfer Equity has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Energy Transfer is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Discover Financial and Energy Transfer

The main advantage of trading using opposite Discover Financial and Energy Transfer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, Energy Transfer 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 Energy Transfer will offset losses from the drop in Energy Transfer's long position.

The idea behind Discover Financial Services and Energy Transfer Equity 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.

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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.