Correlation Between Bread Financial and Medallion Financial

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

Diversification Opportunities for Bread Financial and Medallion Financial

0.39

Correlation Coefficient

Bread Financial  Medallion Financial

Weak diversification

The 3 months correlation between Bread and Medallion is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Bread Financial Holdings 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 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 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 Bread Financial i.e., Bread Financial and Medallion Financial go up and down completely randomly.

Pair Corralation between Bread Financial and Medallion Financial

Considering the 90-day investment horizon Bread Financial Holdings is expected to under-perform the Medallion Financial. In addition to that, Bread Financial is 1.07 times more volatile than Medallion Financial Corp. It trades about -0.14 of its total potential returns per unit of risk. Medallion Financial Corp is currently generating about 0.0 per unit of volatility. If you would invest  923.00  in Medallion Financial Corp on December 29, 2024 and sell it today you would lose (17.00) from holding Medallion Financial Corp or give up 1.84% of portfolio value over 90 days.

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

Bread Financial Holdings  vs.  Medallion Financial Corp

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 unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Medallion Financial Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Medallion Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Medallion Financial is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Bread Financial and Medallion Financial

The main advantage of trading using opposite Bread Financial and Medallion Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bread Financial 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 Bread Financial Holdings 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.

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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.