Correlation Between Alphabet and NFI

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

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

Diversification Opportunities for Alphabet and NFI

0.23

Correlation Coefficient

Alphabet  NFI

Modest diversification

The 3 months correlation between Alphabet and NFI is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc CDR and NFI Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NFI Group and Alphabet 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 Alphabet Inc CDR 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 Alphabet i.e., Alphabet and NFI go up and down completely randomly.

Pair Corralation between Alphabet and NFI

Assuming the 90 days trading horizon Alphabet Inc CDR is expected to under-perform the NFI. But the stock apears to be less risky and, when comparing its historical volatility, Alphabet Inc CDR is 1.85 times less risky than NFI. The stock trades about -0.14 of its potential returns per unit of risk. The NFI Group is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  1,363  in NFI Group on December 30, 2024 and sell it today you would lose (191.00) from holding NFI Group or give up 14.01% of portfolio value over 90 days.

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

Alphabet Inc CDR  vs.  NFI Group

Alphabet CDR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alphabet Inc CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 latest unfluctuating performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Alphabet and NFI

The main advantage of trading using opposite Alphabet and NFI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet 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 Alphabet Inc CDR 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.