Correlation Between FirstCash and Navient Corp

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

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

Diversification Opportunities for FirstCash and Navient Corp

0.7

Correlation Coefficient

FirstCash  Navient Corp

Poor diversification

The 3 months correlation between FirstCash and Navient is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding FirstCash and Navient Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Navient 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 Navient Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Navient Corp has no effect on the direction of FirstCash i.e., FirstCash and Navient Corp go up and down completely randomly.

Pair Corralation between FirstCash and Navient Corp

Given the investment horizon of 90 days FirstCash is expected to under-perform the Navient Corp. But the stock apears to be less risky and, when comparing its historical volatility, FirstCash is 1.43 times less risky than Navient Corp. The stock trades about -0.07 of its potential returns per unit of risk. The Navient Corp is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,598  in Navient Corp on September 2, 2024 and sell it today you would lose (40.00) from holding Navient Corp or give up 2.5% of portfolio value over 90 days.

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

FirstCash  vs.  Navient Corp

FirstCash

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FirstCash has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Navient Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Navient Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Navient Corp is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with FirstCash and Navient Corp

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

The idea behind FirstCash and Navient 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.