Correlation Between Iron Mountain and Bread Financial

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

By analyzing existing cross correlation between Iron Mountain Incorporated and Bread Financial Holdings, you can compare the effects of market volatilities on Iron Mountain and Bread 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 Iron Mountain with a short position of Bread Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iron Mountain and Bread Financial.

Diversification Opportunities for Iron Mountain and Bread Financial

0.4

Correlation Coefficient

Iron Mountain  Bread Financial

Very weak diversification

The 3 months correlation between Iron and Bread is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Iron Mountain Incorporated and Bread Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bread Financial Holdings and Iron Mountain 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 Iron Mountain Incorporated are associated (or correlated) with Bread Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bread Financial Holdings has no effect on the direction of Iron Mountain i.e., Iron Mountain and Bread Financial go up and down completely randomly.

Pair Corralation between Iron Mountain and Bread Financial

Assuming the 90 days trading horizon Iron Mountain Incorporated is expected to under-perform the Bread Financial. In addition to that, Iron Mountain is 1.08 times more volatile than Bread Financial Holdings. It trades about -0.16 of its total potential returns per unit of risk. Bread Financial Holdings is currently generating about 0.37 per unit of volatility. If you would invest  8,336  in Bread Financial Holdings on September 25, 2024 and sell it today you would earn a total of  1,284  from holding Bread Financial Holdings or generate 15.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Iron Mountain Incorporated  vs.  Bread Financial Holdings

Iron Mountain

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iron Mountain Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Iron Mountain is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Bread Financial Holdings

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bread Financial Holdings are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Bread Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Iron Mountain and Bread Financial

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

The idea behind Iron Mountain Incorporated and Bread Financial Holdings 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 Anywhere module to track or share privately all of your investments from the convenience of any device.