Correlation Between Bread Financial and SLM Corp
Can any of the company-specific risk be diversified away by investing in both Bread Financial and SLM Corp 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 SLM Corp 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 SLM Corp, you can compare the effects of market volatilities on Bread Financial and SLM Corp 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 SLM Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bread Financial and SLM Corp.
Diversification Opportunities for Bread Financial and SLM Corp
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bread and SLM is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Bread Financial Holdings and SLM Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SLM Corp 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 SLM Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SLM Corp has no effect on the direction of Bread Financial i.e., Bread Financial and SLM Corp go up and down completely randomly.
Pair Corralation between Bread Financial and SLM Corp
Considering the 90-day investment horizon Bread Financial Holdings is expected to generate 1.5 times more return on investment than SLM Corp. However, Bread Financial is 1.5 times more volatile than SLM Corp. It trades about 0.14 of its potential returns per unit of risk. SLM Corp is currently generating about 0.19 per unit of risk. If you would invest 6,047 in Bread Financial Holdings on November 2, 2024 and sell it today you would earn a total of 318.00 from holding Bread Financial Holdings or generate 5.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bread Financial Holdings vs. SLM Corp
Performance |
| Timeline |
| Bread Financial Holdings |
| SLM Corp |
Bread Financial and SLM Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bread Financial and SLM Corp
The main advantage of trading using opposite Bread Financial and SLM Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bread Financial position performs unexpectedly, SLM Corp 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 SLM Corp will offset losses from the drop in SLM Corp's long position.| Bread Financial vs. SLM Corp | Bread Financial vs. Orix Corp Ads | Bread Financial vs. FirstCash | Bread Financial vs. Medallion Financial Corp |
| SLM Corp vs. Orix Corp Ads | SLM Corp vs. FirstCash | SLM Corp vs. Medallion Financial Corp | SLM Corp vs. Oportun Financial Corp |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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