Correlation Between Bread Financial and Discover Financial
Can any of the company-specific risk be diversified away by investing in both Bread Financial 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 Bread Financial and Discover Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bread Financial Holdings and Discover Financial Services, you can compare the effects of market volatilities on Bread Financial 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 Bread Financial with a short position of Discover Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bread Financial and Discover Financial.
Diversification Opportunities for Bread Financial and Discover Financial
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Bread and Discover is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Bread Financial Holdings and Discover Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discover Financial and Bread 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 Bread Financial Holdings 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 Bread Financial i.e., Bread Financial and Discover Financial go up and down completely randomly.
Pair Corralation between Bread Financial and Discover Financial
Considering the 90-day investment horizon Bread Financial is expected to generate 1.18 times less return on investment than Discover Financial. In addition to that, Bread Financial is 1.06 times more volatile than Discover Financial Services. It trades about 0.17 of its total potential returns per unit of risk. Discover Financial Services is currently generating about 0.22 per unit of volatility. If you would invest 19,024 in Discover Financial Services on May 3, 2025 and sell it today you would earn a total of 981.00 from holding Discover Financial Services or generate 5.16% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 18.03% |
Values | Daily Returns |
Bread Financial Holdings vs. Discover Financial Services
Performance |
Timeline |
Bread Financial Holdings |
Discover Financial |
Risk-Adjusted Performance
Solid
Weak | Strong |
Bread Financial and Discover Financial Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Bread Financial and Discover Financial
The main advantage of trading using opposite Bread Financial and Discover Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bread Financial 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.Bread Financial vs. Atlantic Union Bankshares | Bread Financial vs. Ball Corporation | Bread Financial vs. FirstCash | Bread Financial vs. Federated Investors B |
Discover Financial vs. Ally Financial | Discover Financial vs. Synchrony Financial | Discover Financial vs. Western Union Co | Discover Financial vs. Bread Financial Holdings |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
Other Complementary Tools
Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
Share Portfolio Track or share privately all of your investments from the convenience of any device | |
Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments |