Correlation Between Nicholas Fund and Power Floating

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

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

Diversification Opportunities for Nicholas Fund and Power Floating

0.86

Correlation Coefficient

Nicholas Fund  Power Floating

Very poor diversification

The 3 months correlation between Nicholas and Power is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Nicholas Fund Inc and Power Floating Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Floating Rate and Nicholas Fund 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 Nicholas Fund Inc are associated (or correlated) with Power Floating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Floating Rate has no effect on the direction of Nicholas Fund i.e., Nicholas Fund and Power Floating go up and down completely randomly.

Pair Corralation between Nicholas Fund and Power Floating

Assuming the 90 days horizon Nicholas Fund Inc is expected to under-perform the Power Floating. In addition to that, Nicholas Fund is 9.53 times more volatile than Power Floating Rate. It trades about -0.14 of its total potential returns per unit of risk. Power Floating Rate is currently generating about 0.11 per unit of volatility. If you would invest  1,001  in Power Floating Rate on September 25, 2024 and sell it today you would earn a total of  2.00  from holding Power Floating Rate or generate 0.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Nicholas Fund Inc  vs.  Power Floating Rate

Nicholas Fund

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nicholas Fund Inc are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Nicholas Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Power Floating Rate

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Power Floating Rate are ranked lower than 26 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Power Floating is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nicholas Fund and Power Floating

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

The idea behind Nicholas Fund Inc and Power Floating Rate 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.