Correlation Between NFI and Real Matters

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

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

Diversification Opportunities for NFI and Real Matters

0.84

Correlation Coefficient

NFI  Real Matters

Very poor diversification

The 3 months correlation between NFI and Real is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding NFI Group and Real Matters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Matters and NFI 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 NFI Group are associated (or correlated) with Real Matters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Matters has no effect on the direction of NFI i.e., NFI and Real Matters go up and down completely randomly.

Pair Corralation between NFI and Real Matters

Assuming the 90 days trading horizon NFI is expected to generate 5.71 times less return on investment than Real Matters. But when comparing it to its historical volatility, NFI Group is 1.01 times less risky than Real Matters. It trades about 0.01 of its potential returns per unit of risk. Real Matters is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  525.00  in Real Matters on September 14, 2024 and sell it today you would earn a total of  140.00  from holding Real Matters or generate 26.67% return on investment over 90 days.

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

NFI Group  vs.  Real Matters

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.

Real Matters

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Real Matters 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.

Pair Trading with NFI and Real Matters

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

The idea behind NFI Group and Real Matters 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.