Correlation Between Nicholas Financial and Capital Financial

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

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

Diversification Opportunities for Nicholas Financial and Capital Financial

-0.09

Correlation Coefficient

Nicholas Financial  Capital Financial

Good diversification

The 3 months correlation between Nicholas and Capital is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Nicholas Financial and Capital Financial Gl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Financial and Nicholas Financial 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 Nicholas Financial are associated (or correlated) with Capital Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Financial has no effect on the direction of Nicholas Financial i.e., Nicholas Financial and Capital Financial go up and down completely randomly.

Pair Corralation between Nicholas Financial and Capital Financial

Given the investment horizon of 90 days Nicholas Financial is expected to generate 34.35 times less return on investment than Capital Financial. But when comparing it to its historical volatility, Nicholas Financial is 34.06 times less risky than Capital Financial. It trades about 0.11 of its potential returns per unit of risk. Capital Financial Gl is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  0.01  in Capital Financial Gl on September 4, 2024 and sell it today you would earn a total of  0.00  from holding Capital Financial Gl or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	30.16%
Values	Daily Returns

Nicholas Financial  vs.  Capital Financial Gl

Nicholas Financial

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Nicholas Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite unfluctuating fundamental indicators, Nicholas Financial disclosed solid returns over the last few months and may actually be approaching a breakup point.

Capital Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Financial Gl are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Capital Financial showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nicholas Financial and Capital Financial

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

The idea behind Nicholas Financial and Capital Financial Gl 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.