Correlation Between Nicholas Financial and FirstCash

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

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

Diversification Opportunities for Nicholas Financial and FirstCash

0.7

Correlation Coefficient

Nicholas Financial  FirstCash

Poor diversification

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

Pair Corralation between Nicholas Financial and FirstCash

Given the investment horizon of 90 days Nicholas Financial is expected to generate 2.31 times more return on investment than FirstCash. However, Nicholas Financial is 2.31 times more volatile than FirstCash. It trades about 0.07 of its potential returns per unit of risk. FirstCash is currently generating about -0.07 per unit of risk. If you would invest  595.00  in Nicholas Financial on September 2, 2024 and sell it today you would earn a total of  24.00  from holding Nicholas Financial or generate 4.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	31.25%
Values	Daily Returns

Nicholas Financial  vs.  FirstCash

Nicholas Financial

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Nicholas Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite unfluctuating fundamental indicators, Nicholas Financial disclosed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Nicholas Financial and FirstCash

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

The idea behind Nicholas Financial and FirstCash 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.