Correlation Between Bread Financial and SLM Corp

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

Diversification Opportunities for Bread Financial and SLM Corp

0.23

Correlation Coefficient

Bread Financial  SLM Corp

Modest diversification

The 3 months correlation between Bread and SLM is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Bread Financial Holdings and SLM Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SLM Corp 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 SLM Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SLM Corp has no effect on the direction of Bread Financial i.e., Bread Financial and SLM Corp go up and down completely randomly.

Pair Corralation between Bread Financial and SLM Corp

Considering the 90-day investment horizon Bread Financial Holdings is expected to under-perform the SLM Corp. In addition to that, Bread Financial is 1.26 times more volatile than SLM Corp. It trades about -0.15 of its total potential returns per unit of risk. SLM Corp is currently generating about -0.06 per unit of volatility. If you would invest  2,780  in SLM Corp on January 7, 2025 and sell it today you would lose (287.00) from holding SLM Corp or give up 10.32% of portfolio value over 90 days.

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

Bread Financial Holdings  vs.  SLM Corp

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.

SLM Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days SLM Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's essential indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Bread Financial and SLM Corp

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

The idea behind Bread Financial Holdings and SLM Corp 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..