Correlation Between Nicholas Financial and SLM Corp

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

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

Diversification Opportunities for Nicholas Financial and SLM Corp

-0.2

Correlation Coefficient

Nicholas Financial  SLM Corp

Good diversification

The 3 months correlation between Nicholas and SLM is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Nicholas Financial and SLM Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SLM Corp 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 SLM Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SLM Corp has no effect on the direction of Nicholas Financial i.e., Nicholas Financial and SLM Corp go up and down completely randomly.

Pair Corralation between Nicholas Financial and SLM Corp

Given the investment horizon of 90 days Nicholas Financial is expected to generate 1.55 times less return on investment than SLM Corp. In addition to that, Nicholas Financial is 1.45 times more volatile than SLM Corp. It trades about 0.07 of its total potential returns per unit of risk. SLM Corp is currently generating about 0.16 per unit of volatility. If you would invest  2,159  in SLM Corp on September 2, 2024 and sell it today you would earn a total of  579.00  from holding SLM Corp or generate 26.82% return on investment over 90 days.

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

Nicholas Financial  vs.  SLM Corp

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.

SLM Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SLM Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak essential indicators, SLM Corp displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nicholas Financial and SLM Corp

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

The idea behind Nicholas Financial and SLM 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.