Correlation Between SLM Corp and Barings BDC

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

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

Diversification Opportunities for SLM Corp and Barings BDC

0.48

Correlation Coefficient

SLM Corp  Barings BDC

Very weak diversification

The 3 months correlation between SLM and Barings is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding SLM Corp and Barings BDC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barings BDC and SLM Corp 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 SLM Corp are associated (or correlated) with Barings BDC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barings BDC has no effect on the direction of SLM Corp i.e., SLM Corp and Barings BDC go up and down completely randomly.

Pair Corralation between SLM Corp and Barings BDC

Considering the 90-day investment horizon SLM Corp is expected to generate 2.51 times more return on investment than Barings BDC. However, SLM Corp is 2.51 times more volatile than Barings BDC. It trades about 0.15 of its potential returns per unit of risk. Barings BDC is currently generating about -0.01 per unit of risk. If you would invest  2,245  in SLM Corp on September 27, 2024 and sell it today you would earn a total of  569.00  from holding SLM Corp or generate 25.35% return on investment over 90 days.

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

SLM Corp  vs.  Barings BDC

SLM Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SLM Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal essential indicators, SLM Corp displayed solid returns over the last few months and may actually be approaching a breakup point.

Barings BDC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Barings BDC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Barings BDC is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SLM Corp and Barings BDC

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

The idea behind SLM Corp and Barings BDC 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.