Correlation Between Discover Financial and Citizens Financial
Can any of the company-specific risk be diversified away by investing in both Discover Financial and Citizens 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 Discover Financial and Citizens Financial 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 Citizens Financial Group, you can compare the effects of market volatilities on Discover Financial and Citizens 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 Discover Financial with a short position of Citizens Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and Citizens Financial.
Diversification Opportunities for Discover Financial and Citizens Financial
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Discover and Citizens is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and Citizens Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens Financial 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 Citizens Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citizens Financial has no effect on the direction of Discover Financial i.e., Discover Financial and Citizens Financial go up and down completely randomly.
Pair Corralation between Discover Financial and Citizens Financial
Considering the 90-day investment horizon Discover Financial Services is expected to generate 0.98 times more return on investment than Citizens Financial. However, Discover Financial Services is 1.02 times less risky than Citizens Financial. It trades about 0.03 of its potential returns per unit of risk. Citizens Financial Group is currently generating about 0.01 per unit of risk. If you would invest 10,608 in Discover Financial Services on January 25, 2024 and sell it today you would earn a total of 2,316 from holding Discover Financial Services or generate 21.83% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Discover Financial Services vs. Citizens Financial Group
Performance |
Timeline |
Discover Financial |
Citizens Financial |
Discover Financial and Citizens Financial Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Discover Financial and Citizens Financial
The main advantage of trading using opposite Discover Financial and Citizens Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discover Financial position performs unexpectedly, Citizens 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 Citizens Financial will offset losses from the drop in Citizens Financial's long position.Discover Financial vs. Ally Financial | Discover Financial vs. Synchrony Financial | Discover Financial vs. Western Union Co | Discover Financial vs. Bread Financial Holdings |
Citizens Financial vs. First Community | Citizens Financial vs. Affinity Bancshares | Citizens Financial vs. BOK Financial | Citizens Financial vs. Auburn National Bancorporation |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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