Correlation Between World Acceptance and Bread Financial

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

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

Diversification Opportunities for World Acceptance and Bread Financial

0.16

Correlation Coefficient

World Acceptance  Bread Financial

Average diversification

The 3 months correlation between World and Bread is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding World Acceptance 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 World Acceptance 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 World Acceptance 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 World Acceptance i.e., World Acceptance and Bread Financial go up and down completely randomly.

Pair Corralation between World Acceptance and Bread Financial

Given the investment horizon of 90 days World Acceptance is expected to generate 0.67 times more return on investment than Bread Financial. However, World Acceptance is 1.48 times less risky than Bread Financial. It trades about -0.19 of its potential returns per unit of risk. Bread Financial Holdings is currently generating about -0.26 per unit of risk. If you would invest  11,930  in World Acceptance on October 12, 2024 and sell it today you would lose (645.00) from holding World Acceptance or give up 5.41% of portfolio value over 90 days.

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

World Acceptance  vs.  Bread Financial Holdings

World Acceptance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days World Acceptance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, World Acceptance is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Bread Financial Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bread Financial Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical and fundamental indicators, Bread Financial demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with World Acceptance and Bread Financial

The main advantage of trading using opposite World Acceptance and Bread Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if World Acceptance 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 World Acceptance 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.