Correlation Between NFI and Phoenix

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

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

Diversification Opportunities for NFI and Phoenix

0.41

Correlation Coefficient

NFI  Phoenix

Very weak diversification

The 3 months correlation between NFI and Phoenix is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding NFI Group and Phoenix Motor Common in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phoenix Motor Common 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 Phoenix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phoenix Motor Common has no effect on the direction of NFI i.e., NFI and Phoenix go up and down completely randomly.

Pair Corralation between NFI and Phoenix

Assuming the 90 days horizon NFI Group is expected to under-perform the Phoenix. But the pink sheet apears to be less risky and, when comparing its historical volatility, NFI Group is 14.72 times less risky than Phoenix. The pink sheet trades about -0.27 of its potential returns per unit of risk. The Phoenix Motor Common is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  45.00  in Phoenix Motor Common on September 16, 2024 and sell it today you would lose (14.00) from holding Phoenix Motor Common or give up 31.11% 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.  Phoenix Motor Common

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.

Phoenix Motor Common

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Phoenix Motor Common are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, Phoenix showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NFI and Phoenix

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

The idea behind NFI Group and Phoenix Motor Common 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.