Correlation Between Medallion Financial and Nelnet

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

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

Diversification Opportunities for Medallion Financial and Nelnet

0.07

Correlation Coefficient

Medallion Financial  Nelnet

Significant diversification

The 3 months correlation between Medallion and Nelnet is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Medallion Financial Corp and Nelnet Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nelnet Inc and Medallion 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 Medallion Financial Corp are associated (or correlated) with Nelnet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nelnet Inc has no effect on the direction of Medallion Financial i.e., Medallion Financial and Nelnet go up and down completely randomly.

Pair Corralation between Medallion Financial and Nelnet

Given the investment horizon of 90 days Medallion Financial Corp is expected to generate 0.67 times more return on investment than Nelnet. However, Medallion Financial Corp is 1.49 times less risky than Nelnet. It trades about 0.11 of its potential returns per unit of risk. Nelnet Inc is currently generating about -0.05 per unit of risk. If you would invest  909.00  in Medallion Financial Corp on August 27, 2024 and sell it today you would earn a total of  37.00  from holding Medallion Financial Corp or generate 4.07% return on investment over 90 days.

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

Medallion Financial Corp  vs.  Nelnet Inc

Medallion Financial Corp

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Medallion Financial Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent forward indicators, Medallion Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Nelnet Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nelnet Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Nelnet is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Medallion Financial and Nelnet

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

The idea behind Medallion Financial Corp and Nelnet Inc 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.