Correlation Between NFI and Zapp Electric

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

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

Diversification Opportunities for NFI and Zapp Electric

-0.33

Correlation Coefficient

NFI  Zapp Electric

Very good diversification

The 3 months correlation between NFI and Zapp is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding NFI Group and Zapp Electric Vehicles in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zapp Electric Vehicles 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 Zapp Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zapp Electric Vehicles has no effect on the direction of NFI i.e., NFI and Zapp Electric go up and down completely randomly.

Pair Corralation between NFI and Zapp Electric

Assuming the 90 days horizon NFI Group is expected to under-perform the Zapp Electric. But the pink sheet apears to be less risky and, when comparing its historical volatility, NFI Group is 1.88 times less risky than Zapp Electric. The pink sheet trades about 0.0 of its potential returns per unit of risk. The Zapp Electric Vehicles is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  0.77  in Zapp Electric Vehicles on December 21, 2024 and sell it today you would earn a total of  0.17  from holding Zapp Electric Vehicles or generate 22.08% return on investment over 90 days.

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

NFI Group  vs.  Zapp Electric Vehicles

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.

Zapp Electric Vehicles

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zapp Electric Vehicles are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Zapp Electric showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NFI and Zapp Electric

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

The idea behind NFI Group and Zapp Electric Vehicles 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.