Correlation Between Salesforce and Discover Financial

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

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

Diversification Opportunities for Salesforce and Discover Financial

0.22

Correlation Coefficient

Salesforce  Discover Financial

Modest diversification

The 3 months correlation between Salesforce and Discover is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and Discover Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discover Financial and Salesforce 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 Salesforce 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 Salesforce i.e., Salesforce and Discover Financial go up and down completely randomly.

Pair Corralation between Salesforce and Discover Financial

Considering the 90-day investment horizon Salesforce is expected to under-perform the Discover Financial. But the stock apears to be less risky and, when comparing its historical volatility, Salesforce is 1.47 times less risky than Discover Financial. The stock trades about -0.05 of its potential returns per unit of risk. The Discover Financial Services is currently generating about 0.22 of returns per unit of risk over similar time horizon. 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	17.74%
Values	Daily Returns

Salesforce  vs.  Discover Financial Services

Salesforce

Risk-Adjusted Performance

Very Weak

Over the last 90 days Salesforce has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Salesforce is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Discover Financial

Risk-Adjusted Performance

Solid

Over the last 90 days Discover Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with Salesforce and Discover Financial

The main advantage of trading using opposite Salesforce and Discover Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Salesforce 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 Salesforce 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.