Correlation Between Credit Acceptance and FirstCash

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Can any of the company-specific risk be diversified away by investing in both Credit Acceptance and FirstCash 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 Credit Acceptance and FirstCash into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Credit Acceptance and FirstCash, you can compare the effects of market volatilities on Credit Acceptance and FirstCash 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 Credit Acceptance with a short position of FirstCash. Check out your portfolio center. Please also check ongoing floating volatility patterns of Credit Acceptance and FirstCash.

Diversification Opportunities for Credit Acceptance and FirstCash

0.7
  Correlation Coefficient

Poor diversification

The 3 months correlation between Credit and FirstCash is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Credit Acceptance and FirstCash in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FirstCash and Credit 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 Credit Acceptance are associated (or correlated) with FirstCash. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FirstCash has no effect on the direction of Credit Acceptance i.e., Credit Acceptance and FirstCash go up and down completely randomly.

Pair Corralation between Credit Acceptance and FirstCash

Given the investment horizon of 90 days Credit Acceptance is expected to generate 20.13 times less return on investment than FirstCash. But when comparing it to its historical volatility, Credit Acceptance is 1.2 times less risky than FirstCash. It trades about 0.02 of its potential returns per unit of risk. FirstCash is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest  11,589  in FirstCash on December 30, 2023 and sell it today you would earn a total of  1,165  from holding FirstCash or generate 10.05% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Credit Acceptance  vs.  FirstCash

 Performance 
       Timeline  
Credit Acceptance 

Risk-Adjusted Performance

2 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Credit Acceptance are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Credit Acceptance is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.
FirstCash 

Risk-Adjusted Performance

17 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in FirstCash are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, FirstCash unveiled solid returns over the last few months and may actually be approaching a breakup point.

Credit Acceptance and FirstCash Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Credit Acceptance and FirstCash

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

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