Correlation Between SLM Corp and Oportun Financial

Can any of the company-specific risk be diversified away by investing in both SLM Corp and Oportun 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 Oportun 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 Oportun Financial Corp, you can compare the effects of market volatilities on SLM Corp and Oportun 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 Oportun Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of SLM Corp and Oportun Financial.

Diversification Opportunities for SLM Corp and Oportun Financial

0.86

Correlation Coefficient

SLM Corp  Oportun Financial

Very poor diversification

The 3 months correlation between SLM and Oportun is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding SLM Corp and Oportun Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oportun Financial Corp 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 Oportun Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oportun Financial Corp has no effect on the direction of SLM Corp i.e., SLM Corp and Oportun Financial go up and down completely randomly.

Pair Corralation between SLM Corp and Oportun Financial

Considering the 90-day investment horizon SLM Corp is expected to generate 4.79 times less return on investment than Oportun Financial. But when comparing it to its historical volatility, SLM Corp is 3.09 times less risky than Oportun Financial. It trades about 0.08 of its potential returns per unit of risk. Oportun Financial Corp is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  407.00  in Oportun Financial Corp on December 27, 2024 and sell it today you would earn a total of  163.00  from holding Oportun Financial Corp or generate 40.05% return on investment over 90 days.

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

SLM Corp  vs.  Oportun Financial Corp

SLM Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SLM Corp are ranked lower than 6 (%) 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.

Oportun Financial Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Oportun Financial Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Oportun Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SLM Corp and Oportun Financial

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

The idea behind SLM Corp and Oportun Financial 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.