Correlation Between Bread Financial and Green Dot

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

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

Diversification Opportunities for Bread Financial and Green Dot

0.77

Correlation Coefficient

Bread Financial  Green Dot

Poor diversification

The 3 months correlation between Bread and Green is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Bread Financial Holdings and Green Dot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Dot and Bread Financial 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 Bread Financial Holdings are associated (or correlated) with Green Dot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Dot has no effect on the direction of Bread Financial i.e., Bread Financial and Green Dot go up and down completely randomly.

Pair Corralation between Bread Financial and Green Dot

Considering the 90-day investment horizon Bread Financial Holdings is expected to under-perform the Green Dot. But the stock apears to be less risky and, when comparing its historical volatility, Bread Financial Holdings is 1.38 times less risky than Green Dot. The stock trades about -0.18 of its potential returns per unit of risk. The Green Dot is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  933.00  in Green Dot on January 8, 2025 and sell it today you would lose (189.00) from holding Green Dot or give up 20.26% of portfolio value over 90 days.

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

Bread Financial Holdings  vs.  Green Dot

Bread Financial Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bread Financial Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in May 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Green Dot

Risk-Adjusted Performance

Very Weak

Over the last 90 days Green Dot has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in May 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Bread Financial and Green Dot

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

The idea behind Bread Financial Holdings and Green Dot 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.