Correlation Between SLM Corp and Bread Financial

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

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

Diversification Opportunities for SLM Corp and Bread Financial

-0.16

Correlation Coefficient

SLM Corp  Bread Financial

Good diversification

The 3 months correlation between SLM and Bread is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding SLM Corp and Bread Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bread Financial Holdings and SLM Corp 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 SLM Corp are associated (or correlated) with Bread Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bread Financial Holdings has no effect on the direction of SLM Corp i.e., SLM Corp and Bread Financial go up and down completely randomly.

Pair Corralation between SLM Corp and Bread Financial

Considering the 90-day investment horizon SLM Corp is expected to generate 0.8 times more return on investment than Bread Financial. However, SLM Corp is 1.25 times less risky than Bread Financial. It trades about 0.07 of its potential returns per unit of risk. Bread Financial Holdings is currently generating about -0.14 per unit of risk. If you would invest  2,801  in SLM Corp on December 26, 2024 and sell it today you would earn a total of  203.00  from holding SLM Corp or generate 7.25% return on investment over 90 days.

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

SLM Corp  vs.  Bread Financial Holdings

SLM Corp

Risk-Adjusted Performance

Modest

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

Bread Financial Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bread Financial Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with SLM Corp and Bread Financial

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

The idea behind SLM Corp and Bread Financial Holdings 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.