Correlation Between Bread Financial and GP Investments

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

Diversification Opportunities for Bread Financial and GP Investments

0.12

Correlation Coefficient

Bread Financial  GP Investments

Average diversification

The 3 months correlation between Bread and GPIV33 is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Bread Financial Holdings and GP Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GP Investments 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 GP Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GP Investments has no effect on the direction of Bread Financial i.e., Bread Financial and GP Investments go up and down completely randomly.

Pair Corralation between Bread Financial and GP Investments

Assuming the 90 days trading horizon Bread Financial Holdings is expected to under-perform the GP Investments. But the stock apears to be less risky and, when comparing its historical volatility, Bread Financial Holdings is 1.29 times less risky than GP Investments. The stock trades about -0.09 of its potential returns per unit of risk. The GP Investments is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  371.00  in GP Investments on December 2, 2024 and sell it today you would earn a total of  38.00  from holding GP Investments or generate 10.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.55%
Values	Daily Returns

Bread Financial Holdings  vs.  GP Investments

Bread Financial Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bread Financial Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

GP Investments

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GP Investments are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, GP Investments sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bread Financial and GP Investments

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

The idea behind Bread Financial Holdings and GP Investments 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 Anywhere module to track or share privately all of your investments from the convenience of any device.