Correlation Between NFI and Ag Growth

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

By analyzing existing cross correlation between NFI Group and Ag Growth International, you can compare the effects of market volatilities on NFI and Ag Growth 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 NFI with a short position of Ag Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of NFI and Ag Growth.

Diversification Opportunities for NFI and Ag Growth

0.5

Correlation Coefficient

NFI  Ag Growth

Very weak diversification

The 3 months correlation between NFI and AFN is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding NFI Group and Ag Growth International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ag Growth International and NFI 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 NFI Group are associated (or correlated) with Ag Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ag Growth International has no effect on the direction of NFI i.e., NFI and Ag Growth go up and down completely randomly.

Pair Corralation between NFI and Ag Growth

Assuming the 90 days trading horizon NFI Group is expected to under-perform the Ag Growth. In addition to that, NFI is 1.05 times more volatile than Ag Growth International. It trades about -0.24 of its total potential returns per unit of risk. Ag Growth International is currently generating about -0.02 per unit of volatility. If you would invest  5,442  in Ag Growth International on September 3, 2024 and sell it today you would lose (166.00) from holding Ag Growth International or give up 3.05% of portfolio value over 90 days.

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

NFI Group  vs.  Ag Growth International

NFI Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NFI Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Ag Growth International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with NFI and Ag Growth

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

The idea behind NFI Group and Ag Growth International 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.