Correlation Between Bread Financial and K1SS34

Can any of the company-specific risk be diversified away by investing in both Bread Financial and K1SS34 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 K1SS34 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 K1SS34, you can compare the effects of market volatilities on Bread Financial and K1SS34 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 K1SS34. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bread Financial and K1SS34.

Diversification Opportunities for Bread Financial and K1SS34

-0.83

Correlation Coefficient

Bread Financial  K1SS34

Pay attention - limited upside

The 3 months correlation between Bread and K1SS34 is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Bread Financial Holdings and K1SS34 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on K1SS34 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 K1SS34. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of K1SS34 has no effect on the direction of Bread Financial i.e., Bread Financial and K1SS34 go up and down completely randomly.

Pair Corralation between Bread Financial and K1SS34

Assuming the 90 days trading horizon Bread Financial Holdings is expected to generate 0.86 times more return on investment than K1SS34. However, Bread Financial Holdings is 1.16 times less risky than K1SS34. It trades about 0.22 of its potential returns per unit of risk. K1SS34 is currently generating about -0.08 per unit of risk. If you would invest  6,393  in Bread Financial Holdings on September 29, 2024 and sell it today you would earn a total of  3,167  from holding Bread Financial Holdings or generate 49.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Bread Financial Holdings  vs.  K1SS34

Bread Financial Holdings

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bread Financial Holdings are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Bread Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

K1SS34

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days K1SS34 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Bread Financial and K1SS34

The main advantage of trading using opposite Bread Financial and K1SS34 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bread Financial position performs unexpectedly, K1SS34 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 K1SS34 will offset losses from the drop in K1SS34's long position.

The idea behind Bread Financial Holdings and K1SS34 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.