Correlation Between Nala Digital and Sarfati

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

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

Diversification Opportunities for Nala Digital and Sarfati

0.92

Correlation Coefficient

Nala Digital  Sarfati

Almost no diversification

The 3 months correlation between Nala and Sarfati is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Nala Digital Commerce and Sarfati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sarfati and Nala Digital 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 Nala Digital Commerce are associated (or correlated) with Sarfati. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sarfati has no effect on the direction of Nala Digital i.e., Nala Digital and Sarfati go up and down completely randomly.

Pair Corralation between Nala Digital and Sarfati

Assuming the 90 days trading horizon Nala Digital Commerce is expected to generate 24.73 times more return on investment than Sarfati. However, Nala Digital is 24.73 times more volatile than Sarfati. It trades about 0.05 of its potential returns per unit of risk. Sarfati is currently generating about 0.08 per unit of risk. If you would invest  10,690  in Nala Digital Commerce on September 28, 2024 and sell it today you would earn a total of  58,310  from holding Nala Digital Commerce or generate 545.46% return on investment over 90 days.

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

Nala Digital Commerce  vs.  Sarfati

Nala Digital Commerce

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nala Digital Commerce are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nala Digital sustained solid returns over the last few months and may actually be approaching a breakup point.

Sarfati

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sarfati are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sarfati sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nala Digital and Sarfati

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

The idea behind Nala Digital Commerce and Sarfati 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.