Correlation Between NFI and First Hydrogen

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

By analyzing existing cross correlation between NFI Group and First Hydrogen Corp, you can compare the effects of market volatilities on NFI and First Hydrogen 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 First Hydrogen. Check out your portfolio center. Please also check ongoing floating volatility patterns of NFI and First Hydrogen.

Diversification Opportunities for NFI and First Hydrogen

0.8

Correlation Coefficient

NFI  First Hydrogen

Very poor diversification

The 3 months correlation between NFI and First is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding NFI Group and First Hydrogen Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Hydrogen Corp 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 First Hydrogen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Hydrogen Corp has no effect on the direction of NFI i.e., NFI and First Hydrogen go up and down completely randomly.

Pair Corralation between NFI and First Hydrogen

Assuming the 90 days horizon NFI Group is expected to under-perform the First Hydrogen. But the pink sheet apears to be less risky and, when comparing its historical volatility, NFI Group is 2.41 times less risky than First Hydrogen. The pink sheet trades about -0.27 of its potential returns per unit of risk. The First Hydrogen Corp is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  31.00  in First Hydrogen Corp on September 16, 2024 and sell it today you would lose (7.00) from holding First Hydrogen Corp or give up 22.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.48%
Values	Daily Returns

NFI Group  vs.  First Hydrogen Corp

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. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

First Hydrogen Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Hydrogen Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with NFI and First Hydrogen

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

The idea behind NFI Group and First Hydrogen Corp 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.