Correlation Between NSK and OppFi
Can any of the company-specific risk be diversified away by investing in both NSK and OppFi 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 NSK and OppFi into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NSK Ltd ADR and OppFi Inc, you can compare the effects of market volatilities on NSK and OppFi 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 NSK with a short position of OppFi. Check out your portfolio center. Please also check ongoing floating volatility patterns of NSK and OppFi.
Diversification Opportunities for NSK and OppFi
Pay attention - limited upside
The 3 months correlation between NSK and OppFi is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding NSK Ltd ADR and OppFi Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OppFi Inc and NSK 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 NSK Ltd ADR are associated (or correlated) with OppFi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OppFi Inc has no effect on the direction of NSK i.e., NSK and OppFi go up and down completely randomly.
Pair Corralation between NSK and OppFi
Assuming the 90 days horizon NSK Ltd ADR is expected to under-perform the OppFi. But the pink sheet apears to be less risky and, when comparing its historical volatility, NSK Ltd ADR is 1.87 times less risky than OppFi. The pink sheet trades about -0.05 of its potential returns per unit of risk. The OppFi Inc is currently generating about 0.49 of returns per unit of risk over similar time horizon. If you would invest 485.00 in OppFi Inc on September 4, 2024 and sell it today you would earn a total of 331.00 from holding OppFi Inc or generate 68.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
NSK Ltd ADR vs. OppFi Inc
Performance |
| Timeline |
| NSK Ltd ADR |
| OppFi Inc |
NSK and OppFi Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NSK and OppFi
The main advantage of trading using opposite NSK and OppFi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NSK position performs unexpectedly, OppFi 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 OppFi will offset losses from the drop in OppFi's long position.The idea behind NSK Ltd ADR and OppFi Inc 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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