Correlation Between World Acceptance and Credit Acceptance

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

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

Diversification Opportunities for World Acceptance and Credit Acceptance

0.44

Correlation Coefficient

World Acceptance  Credit Acceptance

Very weak diversification

The 3 months correlation between World and Credit is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding World Acceptance and Credit Acceptance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credit Acceptance 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 Credit Acceptance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credit Acceptance has no effect on the direction of World Acceptance i.e., World Acceptance and Credit Acceptance go up and down completely randomly.

Pair Corralation between World Acceptance and Credit Acceptance

Given the investment horizon of 90 days World Acceptance is expected to generate 1.31 times more return on investment than Credit Acceptance. However, World Acceptance is 1.31 times more volatile than Credit Acceptance. It trades about 0.05 of its potential returns per unit of risk. Credit Acceptance is currently generating about 0.02 per unit of risk. If you would invest  6,735  in World Acceptance on September 4, 2024 and sell it today you would earn a total of  5,283  from holding World Acceptance or generate 78.44% return on investment over 90 days.

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

World Acceptance  vs.  Credit Acceptance

World Acceptance

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in World Acceptance are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Credit Acceptance

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Credit Acceptance are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Credit Acceptance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with World Acceptance and Credit Acceptance

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

The idea behind World Acceptance and Credit Acceptance 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.

Check out your portfolio center.

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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.