Correlation Between Element Fleet and NFI

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

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

Diversification Opportunities for Element Fleet and NFI

0.31

Correlation Coefficient

Element Fleet  NFI

Weak diversification

The 3 months correlation between Element and NFI is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Element Fleet Management and NFI Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NFI Group and Element Fleet 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 Element Fleet Management 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 Element Fleet i.e., Element Fleet and NFI go up and down completely randomly.

Pair Corralation between Element Fleet and NFI

Assuming the 90 days trading horizon Element Fleet Management is expected to generate 0.25 times more return on investment than NFI. However, Element Fleet Management is 4.03 times less risky than NFI. It trades about -0.05 of its potential returns per unit of risk. NFI Group is currently generating about -0.02 per unit of risk. If you would invest  2,905  in Element Fleet Management on December 22, 2024 and sell it today you would lose (94.00) from holding Element Fleet Management or give up 3.24% of portfolio value over 90 days.

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

Element Fleet Management  vs.  NFI Group

Element Fleet Management

Risk-Adjusted Performance

Very Weak

Over the last 90 days Element Fleet Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Element Fleet is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

NFI Group

Risk-Adjusted Performance

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 very healthy forward indicators, NFI is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Element Fleet and NFI

The main advantage of trading using opposite Element Fleet and NFI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Element Fleet 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 Element Fleet Management 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.