Correlation Between PRA and Medallion Financial
Can any of the company-specific risk be diversified away by investing in both PRA and Medallion Financial 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 Medallion Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PRA Group and Medallion Financial Corp, you can compare the effects of market volatilities on PRA and Medallion Financial 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 Medallion Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of PRA and Medallion Financial.
Diversification Opportunities for PRA and Medallion Financial
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between PRA and Medallion is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding PRA Group and Medallion Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medallion Financial Corp 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 Medallion Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medallion Financial Corp has no effect on the direction of PRA i.e., PRA and Medallion Financial go up and down completely randomly.
Pair Corralation between PRA and Medallion Financial
Given the investment horizon of 90 days PRA Group is expected to generate 2.5 times more return on investment than Medallion Financial. However, PRA is 2.5 times more volatile than Medallion Financial Corp. It trades about 0.15 of its potential returns per unit of risk. Medallion Financial Corp is currently generating about 0.04 per unit of risk. If you would invest 1,888 in PRA Group on August 30, 2024 and sell it today you would earn a total of 259.00 from holding PRA Group or generate 13.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PRA Group vs. Medallion Financial Corp
Performance |
| Timeline |
| PRA Group |
| Medallion Financial Corp |
PRA and Medallion Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PRA and Medallion Financial
The main advantage of trading using opposite PRA and Medallion Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PRA position performs unexpectedly, Medallion Financial 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 Medallion Financial will offset losses from the drop in Medallion Financial's long position.The idea behind PRA Group and Medallion Financial Corp 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.| Medallion Financial vs. Midland States Bancorp | Medallion Financial vs. Western New England | Medallion Financial vs. Merchants Bancorp | Medallion Financial vs. MidWestOne Financial 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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