Correlation Between FirstCash and Credit Acceptance
Can any of the company-specific risk be diversified away by investing in both FirstCash and Credit Acceptance 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 FirstCash and Credit Acceptance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FirstCash and Credit Acceptance, you can compare the effects of market volatilities on FirstCash and Credit Acceptance 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 FirstCash with a short position of Credit Acceptance. Check out your portfolio center. Please also check ongoing floating volatility patterns of FirstCash and Credit Acceptance.
Diversification Opportunities for FirstCash and Credit Acceptance
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between FirstCash and Credit is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding FirstCash and Credit Acceptance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credit Acceptance and FirstCash 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 FirstCash are associated (or correlated) with Credit Acceptance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credit Acceptance has no effect on the direction of FirstCash i.e., FirstCash and Credit Acceptance go up and down completely randomly.
Pair Corralation between FirstCash and Credit Acceptance
Given the investment horizon of 90 days FirstCash is expected to under-perform the Credit Acceptance. But the stock apears to be less risky and, when comparing its historical volatility, FirstCash is 1.27 times less risky than Credit Acceptance. The stock trades about -0.01 of its potential returns per unit of risk. The Credit Acceptance is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 45,700 in Credit Acceptance on August 26, 2024 and sell it today you would earn a total of 1,610 from holding Credit Acceptance or generate 3.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FirstCash vs. Credit Acceptance
Performance |
| Timeline |
| FirstCash |
| Credit Acceptance |
FirstCash and Credit Acceptance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FirstCash and Credit Acceptance
The main advantage of trading using opposite FirstCash and Credit Acceptance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FirstCash position performs unexpectedly, Credit Acceptance 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 Credit Acceptance will offset losses from the drop in Credit Acceptance's long position.| FirstCash vs. World Acceptance | FirstCash vs. Enova International | FirstCash vs. Green Dot | FirstCash vs. Medallion Financial Corp |
| Credit Acceptance vs. World Acceptance | Credit Acceptance vs. FirstCash | Credit Acceptance vs. Dorman Products | Credit Acceptance vs. Encore Capital Group |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
Other Complementary Tools
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device |