Correlation Between NFI and Aecon
Can any of the company-specific risk be diversified away by investing in both NFI and Aecon 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 Aecon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NFI Group and Aecon Group, you can compare the effects of market volatilities on NFI and Aecon 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 Aecon. Check out your portfolio center. Please also check ongoing floating volatility patterns of NFI and Aecon.
Diversification Opportunities for NFI and Aecon
Pay attention - limited upside
The 3 months correlation between NFI and Aecon is -0.92. Overlapping area represents the amount of risk that can be diversified away by holding NFI Group and Aecon Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aecon Group 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 Aecon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aecon Group has no effect on the direction of NFI i.e., NFI and Aecon go up and down completely randomly.
Pair Corralation between NFI and Aecon
Assuming the 90 days trading horizon NFI is expected to generate 2.28 times less return on investment than Aecon. In addition to that, NFI is 1.15 times more volatile than Aecon Group. It trades about 0.04 of its total potential returns per unit of risk. Aecon Group is currently generating about 0.11 per unit of volatility. If you would invest 859.00 in Aecon Group on August 24, 2024 and sell it today you would earn a total of 2,057 from holding Aecon Group or generate 239.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NFI Group vs. Aecon Group
Performance |
| Timeline |
| NFI Group |
| Aecon Group |
NFI and Aecon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NFI and Aecon
The main advantage of trading using opposite NFI and Aecon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NFI position performs unexpectedly, Aecon 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 Aecon will offset losses from the drop in Aecon's long position.The idea behind NFI Group and Aecon 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.| Aecon vs. Stantec | Aecon vs. Martinrea International | Aecon vs. Finning International | Aecon vs. WSP Global |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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