Correlation Between FirstCash and SLM Corp
Can any of the company-specific risk be diversified away by investing in both FirstCash 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 FirstCash and SLM Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FirstCash and SLM Corp, you can compare the effects of market volatilities on FirstCash 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 FirstCash with a short position of SLM Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of FirstCash and SLM Corp.
Diversification Opportunities for FirstCash and SLM Corp
Excellent diversification
The 3 months correlation between FirstCash and SLM is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding FirstCash and SLM Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SLM Corp 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 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 FirstCash i.e., FirstCash and SLM Corp go up and down completely randomly.
Pair Corralation between FirstCash and SLM Corp
Given the investment horizon of 90 days FirstCash is expected to under-perform the SLM Corp. But the stock apears to be less risky and, when comparing its historical volatility, FirstCash is 1.17 times less risky than SLM Corp. The stock trades about -0.01 of its potential returns per unit of risk. The SLM Corp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1,469 in SLM Corp on August 26, 2024 and sell it today you would earn a total of 1,244 from holding SLM Corp or generate 84.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
FirstCash vs. SLM Corp
Performance |
| Timeline |
| FirstCash |
| SLM Corp |
FirstCash and SLM Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FirstCash and SLM Corp
The main advantage of trading using opposite FirstCash and SLM Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FirstCash 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.| FirstCash vs. World Acceptance | FirstCash vs. Enova International | FirstCash vs. Green Dot | FirstCash vs. Medallion Financial Corp |
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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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