Correlation Between Bread Financial and FirstCash

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

Diversification Opportunities for Bread Financial and FirstCash

-0.54

Correlation Coefficient

Bread Financial  FirstCash

Excellent diversification

The 3 months correlation between Bread and FirstCash is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Bread Financial Holdings and FirstCash in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FirstCash 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 FirstCash. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FirstCash has no effect on the direction of Bread Financial i.e., Bread Financial and FirstCash go up and down completely randomly.

Pair Corralation between Bread Financial and FirstCash

Considering the 90-day investment horizon Bread Financial Holdings is expected to generate 1.97 times more return on investment than FirstCash. However, Bread Financial is 1.97 times more volatile than FirstCash. It trades about 0.12 of its potential returns per unit of risk. FirstCash is currently generating about -0.12 per unit of risk. If you would invest  5,065  in Bread Financial Holdings on September 21, 2024 and sell it today you would earn a total of  1,211  from holding Bread Financial Holdings or generate 23.91% return on investment over 90 days.

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

Bread Financial Holdings  vs.  FirstCash

Bread Financial Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bread Financial Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical and fundamental indicators, Bread Financial demonstrated solid returns over the last few months and may actually be approaching a breakup point.

FirstCash

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FirstCash has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Bread Financial and FirstCash

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

The idea behind Bread Financial Holdings and FirstCash 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.