Correlation Between Superior Plus and NFI
Can any of the company-specific risk be diversified away by investing in both Superior Plus and NFI 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 Superior Plus and NFI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Superior Plus Corp and NFI Group, you can compare the effects of market volatilities on Superior Plus and NFI 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 Superior Plus with a short position of NFI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Superior Plus and NFI.
Diversification Opportunities for Superior Plus and NFI
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Superior and NFI is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Superior Plus Corp and NFI Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NFI Group and Superior Plus 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 Superior Plus Corp are associated (or correlated) with NFI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NFI Group has no effect on the direction of Superior Plus i.e., Superior Plus and NFI go up and down completely randomly.
Pair Corralation between Superior Plus and NFI
Assuming the 90 days trading horizon Superior Plus Corp is expected to generate 2.76 times more return on investment than NFI. However, Superior Plus is 2.76 times more volatile than NFI Group. It trades about -0.02 of its potential returns per unit of risk. NFI Group is currently generating about -0.33 per unit of risk. If you would invest 659.00 in Superior Plus Corp on August 28, 2024 and sell it today you would lose (30.00) from holding Superior Plus Corp or give up 4.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Superior Plus Corp vs. NFI Group
Performance |
| Timeline |
| Superior Plus Corp |
| NFI Group |
Superior Plus and NFI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Superior Plus and NFI
The main advantage of trading using opposite Superior Plus and NFI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Superior Plus position performs unexpectedly, NFI 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 NFI will offset losses from the drop in NFI's long position.| Superior Plus vs. Gibson Energy | Superior Plus vs. Parkland Fuel | Superior Plus vs. Mullen Group | Superior Plus vs. Keyera Corp |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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