Correlation Between NFI and Great Wall

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

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

Diversification Opportunities for NFI and Great Wall

0.12

Correlation Coefficient

NFI  Great Wall

Average diversification

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

Pair Corralation between NFI and Great Wall

Assuming the 90 days horizon NFI Group is expected to under-perform the Great Wall. In addition to that, NFI is 1.33 times more volatile than Great Wall Motor. It trades about 0.0 of its total potential returns per unit of risk. Great Wall Motor is currently generating about 0.08 per unit of volatility. If you would invest  174.00  in Great Wall Motor on December 20, 2024 and sell it today you would earn a total of  22.00  from holding Great Wall Motor or generate 12.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.61%
Values	Daily Returns

NFI Group  vs.  Great Wall Motor

NFI Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days NFI Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, NFI is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Great Wall Motor

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Great Wall Motor are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Great Wall reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NFI and Great Wall

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

The idea behind NFI Group and Great Wall 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.