Correlation Between NFI and GreenPower

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

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

Diversification Opportunities for NFI and GreenPower

0.87

Correlation Coefficient

NFI  GreenPower

Very poor diversification

The 3 months correlation between NFI and GreenPower is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding NFI Group and GreenPower Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GreenPower Motor 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 GreenPower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GreenPower Motor has no effect on the direction of NFI i.e., NFI and GreenPower go up and down completely randomly.

Pair Corralation between NFI and GreenPower

Assuming the 90 days horizon NFI Group is expected to generate 0.55 times more return on investment than GreenPower. However, NFI Group is 1.82 times less risky than GreenPower. It trades about 0.17 of its potential returns per unit of risk. GreenPower Motor is currently generating about -0.08 per unit of risk. If you would invest  994.00  in NFI Group on October 8, 2024 and sell it today you would earn a total of  63.00  from holding NFI Group or generate 6.34% 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.  GreenPower Motor

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. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

GreenPower Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GreenPower Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Even with abnormal performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with NFI and GreenPower

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

The idea behind NFI Group and GreenPower Motor 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.