Correlation Between SLM Corp and EZCORP

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

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

Diversification Opportunities for SLM Corp and EZCORP

-0.43

Correlation Coefficient

SLM Corp  EZCORP

Very good diversification

The 3 months correlation between SLM and EZCORP is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding SLM Corp Pb and EZCORP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EZCORP Inc 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 Pb 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 SLM Corp i.e., SLM Corp and EZCORP go up and down completely randomly.

Pair Corralation between SLM Corp and EZCORP

Assuming the 90 days horizon SLM Corp is expected to generate 39.06 times less return on investment than EZCORP. But when comparing it to its historical volatility, SLM Corp Pb is 3.03 times less risky than EZCORP. It trades about 0.01 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  1,191  in EZCORP Inc on September 2, 2024 and sell it today you would earn a total of  89.00  from holding EZCORP Inc or generate 7.47% return on investment over 90 days.

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

SLM Corp Pb  vs.  EZCORP Inc

SLM Corp Pb

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SLM Corp Pb has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, SLM Corp is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

EZCORP Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in EZCORP Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, EZCORP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SLM Corp and EZCORP

The main advantage of trading using opposite SLM Corp and EZCORP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SLM Corp 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 SLM Corp Pb 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.