Correlation Between Bread Financial and Navient Corp

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

Diversification Opportunities for Bread Financial and Navient Corp

-0.26

Correlation Coefficient

Bread Financial  Navient Corp

Very good diversification

The 3 months correlation between Bread and Navient is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Bread Financial Holdings and Navient Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Navient 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 Navient Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Navient Corp has no effect on the direction of Bread Financial i.e., Bread Financial and Navient Corp go up and down completely randomly.

Pair Corralation between Bread Financial and Navient Corp

Considering the 90-day investment horizon Bread Financial Holdings is expected to generate 1.61 times more return on investment than Navient Corp. However, Bread Financial is 1.61 times more volatile than Navient Corp. It trades about 0.05 of its potential returns per unit of risk. Navient Corp is currently generating about 0.01 per unit of risk. If you would invest  3,567  in Bread Financial Holdings on September 19, 2024 and sell it today you would earn a total of  2,502  from holding Bread Financial Holdings or generate 70.14% return on investment over 90 days.

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

Bread Financial Holdings  vs.  Navient Corp

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 abnormal technical and fundamental indicators, Bread Financial demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Navient Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Navient Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Bread Financial and Navient Corp

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

The idea behind Bread Financial Holdings and Navient 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.