Correlation Between SLM Corp and Popular Capital

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

By analyzing existing cross correlation between SLM Corp Pb and Popular Capital Trust, you can compare the effects of market volatilities on SLM Corp and Popular Capital 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 Popular Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of SLM Corp and Popular Capital.

Diversification Opportunities for SLM Corp and Popular Capital

-0.04

Correlation Coefficient

SLM Corp  Popular Capital

Good diversification

The 3 months correlation between SLM and Popular is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding SLM Corp Pb and Popular Capital Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Popular Capital Trust 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 Pb are associated (or correlated) with Popular Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Popular Capital Trust has no effect on the direction of SLM Corp i.e., SLM Corp and Popular Capital go up and down completely randomly.

Pair Corralation between SLM Corp and Popular Capital

Assuming the 90 days horizon SLM Corp Pb is expected to under-perform the Popular Capital. But the preferred stock apears to be less risky and, when comparing its historical volatility, SLM Corp Pb is 1.55 times less risky than Popular Capital. The preferred stock trades about -0.03 of its potential returns per unit of risk. The Popular Capital Trust is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,545  in Popular Capital Trust on September 16, 2024 and sell it today you would earn a total of  3.00  from holding Popular Capital Trust or generate 0.12% return on investment over 90 days.

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

SLM Corp Pb  vs.  Popular Capital Trust

SLM Corp Pb

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SLM Corp Pb has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, SLM Corp is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Popular Capital Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Popular Capital Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Popular Capital is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with SLM Corp and Popular Capital

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

The idea behind SLM Corp Pb and Popular Capital Trust 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.