Correlation Between New Amer and Nicholas Financial

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

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

Diversification Opportunities for New Amer and Nicholas Financial

0.07

Correlation Coefficient

New Amer  Nicholas Financial

Significant diversification

The 3 months correlation between New and Nicholas is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding New Amer Energy and Nicholas Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nicholas Financial and New Amer 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 New Amer Energy are associated (or correlated) with Nicholas Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nicholas Financial has no effect on the direction of New Amer i.e., New Amer and Nicholas Financial go up and down completely randomly.

Pair Corralation between New Amer and Nicholas Financial

If you would invest  579.00  in Nicholas Financial on September 4, 2024 and sell it today you would earn a total of  40.00  from holding Nicholas Financial or generate 6.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	5.26%
Values	Daily Returns

New Amer Energy  vs.  Nicholas Financial

New Amer Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Amer Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, New Amer is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nicholas Financial

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Nicholas Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite unfluctuating fundamental indicators, Nicholas Financial disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with New Amer and Nicholas Financial

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

The idea behind New Amer Energy and Nicholas 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.