Correlation Between Nelnet and Medallion Bank

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

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

Diversification Opportunities for Nelnet and Medallion Bank

0.33

Correlation Coefficient

Nelnet  Medallion Bank

Weak diversification

The 3 months correlation between Nelnet and Medallion is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Nelnet Inc and Medallion Bank PR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medallion Bank PR 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 Medallion Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medallion Bank PR has no effect on the direction of Nelnet i.e., Nelnet and Medallion Bank go up and down completely randomly.

Pair Corralation between Nelnet and Medallion Bank

Considering the 90-day investment horizon Nelnet Inc is expected to generate 2.24 times more return on investment than Medallion Bank. However, Nelnet is 2.24 times more volatile than Medallion Bank PR. It trades about 0.06 of its potential returns per unit of risk. Medallion Bank PR is currently generating about 0.07 per unit of risk. If you would invest  10,563  in Nelnet Inc on December 29, 2024 and sell it today you would earn a total of  601.00  from holding Nelnet Inc or generate 5.69% return on investment over 90 days.

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

Nelnet Inc  vs.  Medallion Bank PR

Nelnet Inc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nelnet Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Nelnet may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Medallion Bank PR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Medallion Bank PR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward-looking signals, Medallion Bank is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Nelnet and Medallion Bank

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

The idea behind Nelnet Inc and Medallion Bank PR 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.