Correlation Between Bread Financial and GP Investments
Can any of the company-specific risk be diversified away by investing in both Bread Financial and GP Investments 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 GP Investments 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 GP Investments, you can compare the effects of market volatilities on Bread Financial and GP Investments 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 GP Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bread Financial and GP Investments.
Diversification Opportunities for Bread Financial and GP Investments
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bread and GPIV33 is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Bread Financial Holdings and GP Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GP Investments 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 GP Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GP Investments has no effect on the direction of Bread Financial i.e., Bread Financial and GP Investments go up and down completely randomly.
Pair Corralation between Bread Financial and GP Investments
Assuming the 90 days trading horizon Bread Financial Holdings is expected to generate 1.59 times more return on investment than GP Investments. However, Bread Financial is 1.59 times more volatile than GP Investments. It trades about 0.15 of its potential returns per unit of risk. GP Investments is currently generating about 0.16 per unit of risk. If you would invest 7,438 in Bread Financial Holdings on August 31, 2024 and sell it today you would earn a total of 1,011 from holding Bread Financial Holdings or generate 13.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bread Financial Holdings vs. GP Investments
Performance |
| Timeline |
| Bread Financial Holdings |
| GP Investments |
Bread Financial and GP Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bread Financial and GP Investments
The main advantage of trading using opposite Bread Financial and GP Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bread Financial position performs unexpectedly, GP Investments 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 GP Investments will offset losses from the drop in GP Investments' long position.The idea behind Bread Financial Holdings and GP Investments 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.| GP Investments vs. The Bank of | GP Investments vs. Ameriprise Financial | GP Investments vs. Banco BTG Pactual | GP Investments vs. Banco BTG Pactual |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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