Correlation Between Scandium Canada and NFI

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

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

Diversification Opportunities for Scandium Canada and NFI

0.52

Correlation Coefficient

Scandium Canada  NFI

Very weak diversification

The 3 months correlation between Scandium and NFI is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Scandium Canada and NFI Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NFI Group and Scandium Canada 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 Scandium Canada are associated (or correlated) with NFI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NFI Group has no effect on the direction of Scandium Canada i.e., Scandium Canada and NFI go up and down completely randomly.

Pair Corralation between Scandium Canada and NFI

Assuming the 90 days horizon Scandium Canada is expected to generate 11.14 times more return on investment than NFI. However, Scandium Canada is 11.14 times more volatile than NFI Group. It trades about 0.06 of its potential returns per unit of risk. NFI Group is currently generating about -0.29 per unit of risk. If you would invest  2.00  in Scandium Canada on September 26, 2024 and sell it today you would lose (0.50) from holding Scandium Canada or give up 25.0% of portfolio value over 90 days.

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

Scandium Canada  vs.  NFI Group

Scandium Canada

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Scandium Canada are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Scandium Canada showed solid returns over the last few months and may actually be approaching a breakup point.

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 abnormal 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.

Pair Trading with Scandium Canada and NFI

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

The idea behind Scandium Canada and NFI Group 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.