Correlation Between NFI and Martinrea International
Can any of the company-specific risk be diversified away by investing in both NFI and Martinrea International 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 Martinrea International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NFI Group and Martinrea International, you can compare the effects of market volatilities on NFI and Martinrea International 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 Martinrea International. Check out your portfolio center. Please also check ongoing floating volatility patterns of NFI and Martinrea International.
Diversification Opportunities for NFI and Martinrea International
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NFI and Martinrea is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding NFI Group and Martinrea International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Martinrea International 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 Martinrea International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Martinrea International has no effect on the direction of NFI i.e., NFI and Martinrea International go up and down completely randomly.
Pair Corralation between NFI and Martinrea International
Assuming the 90 days trading horizon NFI Group is expected to generate 1.35 times more return on investment than Martinrea International. However, NFI is 1.35 times more volatile than Martinrea International. It trades about 0.03 of its potential returns per unit of risk. Martinrea International is currently generating about -0.04 per unit of risk. If you would invest 913.00 in NFI Group on November 19, 2024 and sell it today you would earn a total of 251.00 from holding NFI Group or generate 27.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
NFI Group vs. Martinrea International
Performance |
| Timeline |
| NFI Group |
| Martinrea International |
NFI and Martinrea International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NFI and Martinrea International
The main advantage of trading using opposite NFI and Martinrea International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NFI position performs unexpectedly, Martinrea International 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 Martinrea International will offset losses from the drop in Martinrea International's long position.The idea behind NFI Group and Martinrea International 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.| Martinrea International vs. Linamar | Martinrea International vs. Aecon Group | Martinrea International vs. NFI Group | Martinrea International vs. Element Fleet Management |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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