Correlation Between Netcapital and Stifel Financial

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

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

Diversification Opportunities for Netcapital and Stifel Financial

-0.12

Correlation Coefficient

Netcapital  Stifel Financial

Good diversification

The 3 months correlation between Netcapital and Stifel is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Netcapital and Stifel Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stifel Financial and Netcapital 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 Netcapital are associated (or correlated) with Stifel Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stifel Financial has no effect on the direction of Netcapital i.e., Netcapital and Stifel Financial go up and down completely randomly.

Pair Corralation between Netcapital and Stifel Financial

Given the investment horizon of 90 days Netcapital is expected to generate 2.26 times more return on investment than Stifel Financial. However, Netcapital is 2.26 times more volatile than Stifel Financial. It trades about 0.11 of its potential returns per unit of risk. Stifel Financial is currently generating about -0.17 per unit of risk. If you would invest  191.00  in Netcapital on November 28, 2024 and sell it today you would earn a total of  15.00  from holding Netcapital or generate 7.85% return on investment over 90 days.

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

Netcapital  vs.  Stifel Financial

Netcapital

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Netcapital are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Netcapital disclosed solid returns over the last few months and may actually be approaching a breakup point.

Stifel Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stifel Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Netcapital and Stifel Financial

The main advantage of trading using opposite Netcapital and Stifel Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netcapital position performs unexpectedly, Stifel Financial 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 Stifel Financial will offset losses from the drop in Stifel Financial's long position.

The idea behind Netcapital and Stifel Financial 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.