Correlation Between Founder Group and Discover Financial

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

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

Diversification Opportunities for Founder Group and Discover Financial

0.21

Correlation Coefficient

Founder Group  Discover Financial

Modest diversification

The 3 months correlation between Founder and Discover is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Founder Group Limited and Discover Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discover Financial and Founder Group 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 Founder Group Limited 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 Founder Group i.e., Founder Group and Discover Financial go up and down completely randomly.

Pair Corralation between Founder Group and Discover Financial

Considering the 90-day investment horizon Founder Group Limited is expected to under-perform the Discover Financial. In addition to that, Founder Group is 5.2 times more volatile than Discover Financial Services. It trades about -0.02 of its total potential returns per unit of risk. Discover Financial Services is currently generating about 0.12 per unit of volatility. If you would invest  13,963  in Discover Financial Services on September 22, 2024 and sell it today you would earn a total of  3,353  from holding Discover Financial Services or generate 24.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	65.63%
Values	Daily Returns

Founder Group Limited  vs.  Discover Financial Services

Founder Group Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Founder Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Discover Financial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Discover Financial Services are ranked lower than 9 (%) 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.

Pair Trading with Founder Group and Discover Financial

The main advantage of trading using opposite Founder Group and Discover Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Founder Group 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.

The idea behind Founder Group Limited and Discover Financial Services 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.