Correlation Between SLM Corp and Stifel Financial
Can any of the company-specific risk be diversified away by investing in both SLM Corp and Stifel Financial 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 Stifel Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SLM Corp and Stifel Financial, you can compare the effects of market volatilities on SLM Corp and Stifel Financial 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 Stifel Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of SLM Corp and Stifel Financial.
Diversification Opportunities for SLM Corp and Stifel Financial
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SLM and Stifel is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding SLM Corp and Stifel Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stifel Financial 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 Stifel Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stifel Financial has no effect on the direction of SLM Corp i.e., SLM Corp and Stifel Financial go up and down completely randomly.
Pair Corralation between SLM Corp and Stifel Financial
Considering the 90-day investment horizon SLM Corp is expected to generate 1.13 times more return on investment than Stifel Financial. However, SLM Corp is 1.13 times more volatile than Stifel Financial. It trades about 0.04 of its potential returns per unit of risk. Stifel Financial is currently generating about 0.04 per unit of risk. If you would invest 2,051 in SLM Corp on January 17, 2024 and sell it today you would earn a total of 21.00 from holding SLM Corp or generate 1.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SLM Corp vs. Stifel Financial
Performance |
| Timeline |
| SLM Corp |
| Stifel Financial |
SLM Corp and Stifel Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SLM Corp and Stifel Financial
The main advantage of trading using opposite SLM Corp and Stifel Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SLM Corp position performs unexpectedly, Stifel Financial 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 Stifel Financial will offset losses from the drop in Stifel Financial's long position.The idea behind SLM Corp and Stifel Financial 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.| Stifel Financial vs. JPMorgan Chase Co | Stifel Financial vs. Wells Fargo | Stifel Financial vs. Citigroup | Stifel Financial vs. American Express |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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