Correlation Between FirstCash and FS Credit

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

By analyzing existing cross correlation between FirstCash and FS Credit Opportunities, you can compare the effects of market volatilities on FirstCash and FS Credit 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 FS Credit. Check out your portfolio center. Please also check ongoing floating volatility patterns of FirstCash and FS Credit.

Diversification Opportunities for FirstCash and FS Credit

0.86

Correlation Coefficient

FirstCash  FS Credit

Very poor diversification

The 3 months correlation between FirstCash and FSCO is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding FirstCash and FS Credit Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FS Credit Opportunities 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 FS Credit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FS Credit Opportunities has no effect on the direction of FirstCash i.e., FirstCash and FS Credit go up and down completely randomly.

Pair Corralation between FirstCash and FS Credit

Given the investment horizon of 90 days FirstCash is expected to generate 1.45 times more return on investment than FS Credit. However, FirstCash is 1.45 times more volatile than FS Credit Opportunities. It trades about 0.21 of its potential returns per unit of risk. FS Credit Opportunities is currently generating about 0.15 per unit of risk. If you would invest  10,262  in FirstCash on December 28, 2024 and sell it today you would earn a total of  1,753  from holding FirstCash or generate 17.08% return on investment over 90 days.

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

FirstCash  vs.  FS Credit Opportunities

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

FS Credit Opportunities

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FS Credit Opportunities are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental indicators, FS Credit may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with FirstCash and FS Credit

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

The idea behind FirstCash and FS Credit Opportunities 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.