Correlation Between Bread Financial and Dell Technologies

Can any of the company-specific risk be diversified away by investing in both Bread Financial and Dell Technologies 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 Dell Technologies 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 Dell Technologies, you can compare the effects of market volatilities on Bread Financial and Dell Technologies 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 Dell Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bread Financial and Dell Technologies.

Diversification Opportunities for Bread Financial and Dell Technologies

0.47

Correlation Coefficient

Bread Financial  Dell Technologies

Very weak diversification

The 3 months correlation between Bread and Dell is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Bread Financial Holdings and Dell Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dell Technologies 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 Dell Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dell Technologies has no effect on the direction of Bread Financial i.e., Bread Financial and Dell Technologies go up and down completely randomly.

Pair Corralation between Bread Financial and Dell Technologies

Assuming the 90 days trading horizon Bread Financial Holdings is expected to generate 1.16 times more return on investment than Dell Technologies. However, Bread Financial is 1.16 times more volatile than Dell Technologies. It trades about 0.16 of its potential returns per unit of risk. Dell Technologies is currently generating about 0.04 per unit of risk. If you would invest  6,833  in Bread Financial Holdings on October 10, 2024 and sell it today you would earn a total of  2,194  from holding Bread Financial Holdings or generate 32.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Bread Financial Holdings  vs.  Dell Technologies

Bread Financial Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bread Financial Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Bread Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Dell Technologies

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dell Technologies are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Dell Technologies may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Bread Financial and Dell Technologies

The main advantage of trading using opposite Bread Financial and Dell Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bread Financial position performs unexpectedly, Dell Technologies 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 Dell Technologies will offset losses from the drop in Dell Technologies' long position.

The idea behind Bread Financial Holdings and Dell Technologies 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.

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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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.