Correlation Between Nelnet and Saratoga Investment

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

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

Diversification Opportunities for Nelnet and Saratoga Investment

0.41

Correlation Coefficient

Nelnet  Saratoga Investment

Very weak diversification

The 3 months correlation between Nelnet and Saratoga is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Nelnet Inc and Saratoga Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saratoga Investment Corp 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 Saratoga Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saratoga Investment Corp has no effect on the direction of Nelnet i.e., Nelnet and Saratoga Investment go up and down completely randomly.

Pair Corralation between Nelnet and Saratoga Investment

Considering the 90-day investment horizon Nelnet Inc is expected to generate 1.5 times more return on investment than Saratoga Investment. However, Nelnet is 1.5 times more volatile than Saratoga Investment Corp. It trades about 0.1 of its potential returns per unit of risk. Saratoga Investment Corp is currently generating about 0.09 per unit of risk. If you would invest  10,559  in Nelnet Inc on December 20, 2024 and sell it today you would earn a total of  970.00  from holding Nelnet Inc or generate 9.19% return on investment over 90 days.

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

Nelnet Inc  vs.  Saratoga Investment Corp

Nelnet Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nelnet Inc are ranked lower than 8 (%) 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.

Saratoga Investment Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Saratoga Investment Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Saratoga Investment 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 Saratoga Investment

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

The idea behind Nelnet Inc and Saratoga Investment 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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.