Correlation Between Now and Profire Ene
Can any of the company-specific risk be diversified away by investing in both Now and Profire Ene 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 Now and Profire Ene into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Now Inc and Profire Ene, you can compare the effects of market volatilities on Now and Profire Ene 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 Now with a short position of Profire Ene. Check out your portfolio center. Please also check ongoing floating volatility patterns of Now and Profire Ene.
Diversification Opportunities for Now and Profire Ene
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Now and Profire is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Now Inc and Profire Ene in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Profire Ene and Now 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 Now Inc are associated (or correlated) with Profire Ene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Profire Ene has no effect on the direction of Now i.e., Now and Profire Ene go up and down completely randomly.
Pair Corralation between Now and Profire Ene
Given the investment horizon of 90 days Now is expected to generate 4.05 times less return on investment than Profire Ene. But when comparing it to its historical volatility, Now Inc is 1.86 times less risky than Profire Ene. It trades about 0.03 of its potential returns per unit of risk. Profire Ene is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 107.00 in Profire Ene on September 2, 2024 and sell it today you would earn a total of 145.00 from holding Profire Ene or generate 135.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Now Inc vs. Profire Ene
Performance |
| Timeline |
| Now Inc |
| Profire Ene |
Now and Profire Ene Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Now and Profire Ene
The main advantage of trading using opposite Now and Profire Ene positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Now position performs unexpectedly, Profire Ene 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 Profire Ene will offset losses from the drop in Profire Ene's long position.| Now vs. Oil States International | Now vs. Oceaneering International | Now vs. Geospace Technologies | Now vs. Newpark Resources |
| Profire Ene vs. Enerflex | Profire Ene vs. Now Inc | Profire Ene vs. Bristow Group | Profire Ene vs. Helix Energy Solutions |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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