Correlation Between Boralex and NFI

Can any of the company-specific risk be diversified away by investing in both Boralex 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 Boralex and NFI into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Boralex and NFI Group, you can compare the effects of market volatilities on Boralex 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 Boralex with a short position of NFI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boralex and NFI.

Diversification Opportunities for Boralex and NFI

0.88

Correlation Coefficient

Boralex  NFI

Very poor diversification

The 3 months correlation between Boralex and NFI is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Boralex and NFI Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NFI Group and Boralex 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 Boralex 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 Boralex i.e., Boralex and NFI go up and down completely randomly.

Pair Corralation between Boralex and NFI

Assuming the 90 days trading horizon Boralex is expected to generate 7.69 times less return on investment than NFI. But when comparing it to its historical volatility, Boralex is 1.33 times less risky than NFI. It trades about 0.0 of its potential returns per unit of risk. NFI Group is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,397  in NFI Group on September 14, 2024 and sell it today you would lose (21.00) from holding NFI Group or give up 1.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Boralex  vs.  NFI Group

Boralex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boralex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

NFI Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NFI Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Boralex and NFI

The main advantage of trading using opposite Boralex and NFI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boralex 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.

The idea behind Boralex and NFI 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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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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.