Correlation Between NFI and Transat AT

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

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

Diversification Opportunities for NFI and Transat AT

-0.58

Correlation Coefficient

NFI  Transat AT

Excellent diversification

The 3 months correlation between NFI and Transat is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding NFI Group and Transat AT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transat AT 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 Transat AT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transat AT has no effect on the direction of NFI i.e., NFI and Transat AT go up and down completely randomly.

Pair Corralation between NFI and Transat AT

Assuming the 90 days trading horizon NFI Group is expected to generate 1.16 times more return on investment than Transat AT. However, NFI is 1.16 times more volatile than Transat AT. It trades about 0.04 of its potential returns per unit of risk. Transat AT is currently generating about -0.03 per unit of risk. If you would invest  963.00  in NFI Group on September 24, 2024 and sell it today you would earn a total of  439.00  from holding NFI Group or generate 45.59% return on investment over 90 days.

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

NFI Group  vs.  Transat AT

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.

Transat AT

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Transat AT are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Transat AT is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with NFI and Transat AT

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

The idea behind NFI Group and Transat AT 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.