Correlation Between FirstCash and Freedom Holding

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

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

Diversification Opportunities for FirstCash and Freedom Holding

0.39

Correlation Coefficient

FirstCash  Freedom Holding

Weak diversification

The 3 months correlation between FirstCash and Freedom is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding FirstCash and Freedom Holding Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freedom Holding Corp and FirstCash 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 FirstCash are associated (or correlated) with Freedom Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freedom Holding Corp has no effect on the direction of FirstCash i.e., FirstCash and Freedom Holding go up and down completely randomly.

Pair Corralation between FirstCash and Freedom Holding

Given the investment horizon of 90 days FirstCash is expected to generate 0.48 times more return on investment than Freedom Holding. However, FirstCash is 2.08 times less risky than Freedom Holding. It trades about 0.2 of its potential returns per unit of risk. Freedom Holding Corp is currently generating about 0.02 per unit of risk. If you would invest  10,262  in FirstCash on December 30, 2024 and sell it today you would earn a total of  1,674  from holding FirstCash or generate 16.31% return on investment over 90 days.

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

FirstCash  vs.  Freedom Holding Corp

FirstCash

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FirstCash are ranked lower than 15 (%) 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.

Freedom Holding Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Freedom Holding Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, Freedom Holding is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with FirstCash and Freedom Holding

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

The idea behind FirstCash and Freedom Holding 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.