Correlation Between Nigerian Stock and VFD GROUP

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Can any of the company-specific risk be diversified away by investing in both Nigerian Stock and VFD GROUP 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 Nigerian Stock and VFD GROUP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nigerian Stock Exchange and VFD GROUP, you can compare the effects of market volatilities on Nigerian Stock and VFD GROUP 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 Nigerian Stock with a short position of VFD GROUP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nigerian Stock and VFD GROUP.

Diversification Opportunities for Nigerian Stock and VFD GROUP

-0.03
  Correlation Coefficient

Good diversification

The 3 months correlation between Nigerian and VFD is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Nigerian Stock Exchange and VFD GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VFD GROUP and Nigerian Stock 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 Nigerian Stock Exchange are associated (or correlated) with VFD GROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VFD GROUP has no effect on the direction of Nigerian Stock i.e., Nigerian Stock and VFD GROUP go up and down completely randomly.
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Pair Corralation between Nigerian Stock and VFD GROUP

Assuming the 90 days trading horizon Nigerian Stock Exchange is expected to generate 0.17 times more return on investment than VFD GROUP. However, Nigerian Stock Exchange is 5.82 times less risky than VFD GROUP. It trades about 0.18 of its potential returns per unit of risk. VFD GROUP is currently generating about -0.07 per unit of risk. If you would invest  5,595,659  in Nigerian Stock Exchange on August 31, 2024 and sell it today you would earn a total of  4,155,028  from holding Nigerian Stock Exchange or generate 74.25% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy77.93%
ValuesDaily Returns

Nigerian Stock Exchange  vs.  VFD GROUP

 Performance 
       Timeline  

Nigerian Stock and VFD GROUP Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Nigerian Stock and VFD GROUP

The main advantage of trading using opposite Nigerian Stock and VFD GROUP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nigerian Stock position performs unexpectedly, VFD GROUP 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 VFD GROUP will offset losses from the drop in VFD GROUP's long position.
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The idea behind Nigerian Stock Exchange and VFD 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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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.

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