Correlation Between EZCORP and FirstCash

Can any of the company-specific risk be diversified away by investing in both EZCORP 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 EZCORP and FirstCash into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between EZCORP Inc and FirstCash, you can compare the effects of market volatilities on EZCORP 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 EZCORP with a short position of FirstCash. Check out your portfolio center. Please also check ongoing floating volatility patterns of EZCORP and FirstCash.

Diversification Opportunities for EZCORP and FirstCash

0.82

Correlation Coefficient

EZCORP  FirstCash

Very poor diversification

The 3 months correlation between EZCORP and FirstCash is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding EZCORP Inc and FirstCash in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FirstCash and EZCORP 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 EZCORP Inc 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 EZCORP i.e., EZCORP and FirstCash go up and down completely randomly.

Pair Corralation between EZCORP and FirstCash

Given the investment horizon of 90 days EZCORP Inc is expected to generate 1.53 times more return on investment than FirstCash. However, EZCORP is 1.53 times more volatile than FirstCash. It trades about 0.16 of its potential returns per unit of risk. FirstCash is currently generating about 0.21 per unit of risk. If you would invest  1,226  in EZCORP Inc on December 29, 2024 and sell it today you would earn a total of  242.00  from holding EZCORP Inc or generate 19.74% return on investment over 90 days.

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

EZCORP Inc  vs.  FirstCash

EZCORP Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EZCORP Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, EZCORP showed solid returns over the last few months and may actually be approaching a breakup point.

FirstCash

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in FirstCash are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, FirstCash unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EZCORP and FirstCash

The main advantage of trading using opposite EZCORP and FirstCash positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EZCORP 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 EZCORP Inc 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.

Check out your portfolio center.

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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.