Correlation Between Nelnet and EZCORP

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

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

Diversification Opportunities for Nelnet and EZCORP

-0.48

Correlation Coefficient

Nelnet  EZCORP

Very good diversification

The 3 months correlation between Nelnet and EZCORP is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Nelnet Inc and EZCORP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EZCORP Inc and Nelnet 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 Nelnet Inc are associated (or correlated) with EZCORP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EZCORP Inc has no effect on the direction of Nelnet i.e., Nelnet and EZCORP go up and down completely randomly.

Pair Corralation between Nelnet and EZCORP

Considering the 90-day investment horizon Nelnet is expected to generate 1.6 times less return on investment than EZCORP. But when comparing it to its historical volatility, Nelnet Inc is 1.11 times less risky than EZCORP. It trades about 0.05 of its potential returns per unit of risk. EZCORP Inc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  894.00  in EZCORP Inc on September 20, 2024 and sell it today you would earn a total of  306.00  from holding EZCORP Inc or generate 34.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Nelnet Inc  vs.  EZCORP Inc

Nelnet Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nelnet Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

EZCORP Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EZCORP Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, EZCORP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Nelnet and EZCORP

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

The idea behind Nelnet Inc and EZCORP Inc 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.