Correlation Between EZCORP and SLM Corp

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

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

Diversification Opportunities for EZCORP and SLM Corp

0.75

Correlation Coefficient

EZCORP  SLM Corp

Poor diversification

The 3 months correlation between EZCORP and SLM is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding EZCORP Inc and SLM Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SLM Corp 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 SLM Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SLM Corp has no effect on the direction of EZCORP i.e., EZCORP and SLM Corp go up and down completely randomly.

Pair Corralation between EZCORP and SLM Corp

Given the investment horizon of 90 days EZCORP is expected to generate 3.55 times less return on investment than SLM Corp. But when comparing it to its historical volatility, EZCORP Inc is 1.6 times less risky than SLM Corp. It trades about 0.07 of its potential returns per unit of risk. SLM Corp is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,114  in SLM Corp on September 4, 2024 and sell it today you would earn a total of  542.00  from holding SLM Corp or generate 25.64% return on investment over 90 days.

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

EZCORP Inc  vs.  SLM Corp

EZCORP Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in EZCORP Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, EZCORP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

SLM Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SLM Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak essential indicators, SLM Corp displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EZCORP and SLM Corp

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

The idea behind EZCORP Inc and SLM 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.