Correlation Between World Acceptance and Nelnet

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

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

Diversification Opportunities for World Acceptance and Nelnet

0.32

Correlation Coefficient

World Acceptance  Nelnet

Weak diversification

The 3 months correlation between World and Nelnet is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding World Acceptance and Nelnet Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nelnet Inc and World 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 World Acceptance 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 World Acceptance i.e., World Acceptance and Nelnet go up and down completely randomly.

Pair Corralation between World Acceptance and Nelnet

Given the investment horizon of 90 days World Acceptance is expected to generate 1.18 times more return on investment than Nelnet. However, World Acceptance is 1.18 times more volatile than Nelnet Inc. It trades about -0.01 of its potential returns per unit of risk. Nelnet Inc is currently generating about -0.03 per unit of risk. If you would invest  11,316  in World Acceptance on October 1, 2024 and sell it today you would lose (243.00) from holding World Acceptance or give up 2.15% of portfolio value over 90 days.

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

World Acceptance  vs.  Nelnet Inc

World Acceptance

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with World Acceptance and Nelnet

The main advantage of trading using opposite World Acceptance and Nelnet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if World Acceptance 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 World Acceptance 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.