Correlation Between Discover Financial and TLGY Acquisition

Can any of the company-specific risk be diversified away by investing in both Discover Financial and TLGY Acquisition 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 TLGY Acquisition 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 TLGY Acquisition Corp, you can compare the effects of market volatilities on Discover Financial and TLGY Acquisition 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 TLGY Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discover Financial and TLGY Acquisition.

Diversification Opportunities for Discover Financial and TLGY Acquisition

0.91

Correlation Coefficient

Discover Financial  TLGY Acquisition

Almost no diversification

The 3 months correlation between Discover and TLGY is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and TLGY Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TLGY Acquisition Corp 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 TLGY Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TLGY Acquisition Corp has no effect on the direction of Discover Financial i.e., Discover Financial and TLGY Acquisition go up and down completely randomly.

Pair Corralation between Discover Financial and TLGY Acquisition

Considering the 90-day investment horizon Discover Financial Services is expected to generate 44.53 times more return on investment than TLGY Acquisition. However, Discover Financial is 44.53 times more volatile than TLGY Acquisition Corp. It trades about 0.15 of its potential returns per unit of risk. TLGY Acquisition Corp is currently generating about 0.27 per unit of risk. If you would invest  13,556  in Discover Financial Services on September 18, 2024 and sell it today you would earn a total of  4,112  from holding Discover Financial Services or generate 30.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Discover Financial Services  vs.  TLGY Acquisition Corp

Discover Financial

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Discover Financial Services are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal technical and fundamental indicators, Discover Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

TLGY Acquisition Corp

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TLGY Acquisition Corp are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, TLGY Acquisition is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Discover Financial and TLGY Acquisition

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

The idea behind Discover Financial Services and TLGY Acquisition Corp 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.

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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.