Correlation Between PRA and EZCORP
Can any of the company-specific risk be diversified away by investing in both PRA and EZCORP 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 PRA and EZCORP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PRA Group and EZCORP Inc, you can compare the effects of market volatilities on PRA and EZCORP 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 PRA with a short position of EZCORP. Check out your portfolio center. Please also check ongoing floating volatility patterns of PRA and EZCORP.
Diversification Opportunities for PRA and EZCORP
Good diversification
The 3 months correlation between PRA and EZCORP is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding PRA Group and EZCORP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EZCORP Inc and PRA 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 PRA Group are associated (or correlated) with EZCORP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EZCORP Inc has no effect on the direction of PRA i.e., PRA and EZCORP go up and down completely randomly.
Pair Corralation between PRA and EZCORP
Given the investment horizon of 90 days PRA Group is expected to generate 1.7 times more return on investment than EZCORP. However, PRA is 1.7 times more volatile than EZCORP Inc. It trades about 0.29 of its potential returns per unit of risk. EZCORP Inc is currently generating about 0.13 per unit of risk. If you would invest 2,059 in PRA Group on November 2, 2024 and sell it today you would earn a total of 203.00 from holding PRA Group or generate 9.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PRA Group vs. EZCORP Inc
Performance |
| Timeline |
| PRA Group |
| EZCORP Inc |
PRA and EZCORP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PRA and EZCORP
The main advantage of trading using opposite PRA and EZCORP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PRA position performs unexpectedly, EZCORP 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 EZCORP will offset losses from the drop in EZCORP's long position.The idea behind PRA Group and EZCORP Inc 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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