Correlation Between SLM Corp and Nelnet

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

Diversification Opportunities for SLM Corp and Nelnet

0.84

Correlation Coefficient

SLM Corp  Nelnet

Very poor diversification

The 3 months correlation between SLM and Nelnet is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding SLM Corp Pb and Nelnet Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nelnet 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 Nelnet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nelnet Inc has no effect on the direction of SLM Corp i.e., SLM Corp and Nelnet go up and down completely randomly.

Pair Corralation between SLM Corp and Nelnet

Assuming the 90 days horizon SLM Corp Pb is expected to generate 0.38 times more return on investment than Nelnet. However, SLM Corp Pb is 2.65 times less risky than Nelnet. It trades about 0.19 of its potential returns per unit of risk. Nelnet Inc is currently generating about 0.04 per unit of risk. If you would invest  7,328  in SLM Corp Pb on November 28, 2024 and sell it today you would earn a total of  294.00  from holding SLM Corp Pb or generate 4.01% return on investment over 90 days.

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

SLM Corp Pb  vs.  Nelnet Inc

SLM Corp Pb

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SLM Corp Pb are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental drivers, SLM Corp is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Nelnet Inc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nelnet Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Nelnet is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with SLM Corp and Nelnet

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

The idea behind SLM Corp Pb and Nelnet 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.