Correlation Between Discover Financial and Tortoise Energy

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

Diversification Opportunities for Discover Financial and Tortoise Energy

0.9

Correlation Coefficient

Discover Financial  Tortoise Energy

Almost no diversification

The 3 months correlation between Discover and Tortoise is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Discover Financial Services and Tortoise Energy Infrastructure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tortoise Energy Infr 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 Tortoise Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tortoise Energy Infr has no effect on the direction of Discover Financial i.e., Discover Financial and Tortoise Energy go up and down completely randomly.

Pair Corralation between Discover Financial and Tortoise Energy

Considering the 90-day investment horizon Discover Financial Services is expected to generate 2.69 times more return on investment than Tortoise Energy. However, Discover Financial is 2.69 times more volatile than Tortoise Energy Infrastructure. It trades about 0.16 of its potential returns per unit of risk. Tortoise Energy Infrastructure is currently generating about 0.3 per unit of risk. If you would invest  13,184  in Discover Financial Services on September 5, 2024 and sell it today you would earn a total of  4,659  from holding Discover Financial Services or generate 35.34% 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.  Tortoise Energy Infrastructure

Discover Financial

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Discover Financial Services are ranked lower than 12 (%) 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.

Tortoise Energy Infr

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tortoise Energy Infrastructure are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Tortoise Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Discover Financial and Tortoise Energy

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

The idea behind Discover Financial Services and Tortoise Energy Infrastructure 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .