Correlation Between FirstCash and Medallion Financial

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

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

Diversification Opportunities for FirstCash and Medallion Financial

-0.52

Correlation Coefficient

FirstCash  Medallion Financial

Excellent diversification

The 3 months correlation between FirstCash and Medallion is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding FirstCash and Medallion Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medallion Financial 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 Medallion Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medallion Financial Corp has no effect on the direction of FirstCash i.e., FirstCash and Medallion Financial go up and down completely randomly.

Pair Corralation between FirstCash and Medallion Financial

Given the investment horizon of 90 days FirstCash is expected to generate 0.6 times more return on investment than Medallion Financial. However, FirstCash is 1.67 times less risky than Medallion Financial. It trades about 0.2 of its potential returns per unit of risk. Medallion Financial Corp is currently generating about 0.0 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 Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

FirstCash  vs.  Medallion Financial 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.

Medallion Financial Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Medallion Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Medallion Financial is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with FirstCash and Medallion Financial

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

The idea behind FirstCash and Medallion Financial 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.