Correlation Between Bread Financial and World Acceptance

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

Diversification Opportunities for Bread Financial and World Acceptance

0.21

Correlation Coefficient

Bread Financial  World Acceptance

Modest diversification

The 3 months correlation between Bread and World is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Bread Financial Holdings and World Acceptance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Acceptance 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 World Acceptance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Acceptance has no effect on the direction of Bread Financial i.e., Bread Financial and World Acceptance go up and down completely randomly.

Pair Corralation between Bread Financial and World Acceptance

Considering the 90-day investment horizon Bread Financial is expected to generate 6.64 times less return on investment than World Acceptance. In addition to that, Bread Financial is 1.14 times more volatile than World Acceptance. It trades about 0.06 of its total potential returns per unit of risk. World Acceptance is currently generating about 0.42 per unit of volatility. If you would invest  11,220  in World Acceptance on October 27, 2024 and sell it today you would earn a total of  1,746  from holding World Acceptance or generate 15.56% return on investment over 90 days.

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

Bread Financial Holdings  vs.  World Acceptance

Bread Financial Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bread Financial Holdings are ranked lower than 10 (%) 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.

World Acceptance

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in World Acceptance are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain essential indicators, World Acceptance may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Bread Financial and World Acceptance

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

The idea behind Bread Financial Holdings and World Acceptance 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..