Correlation Between NORTHERN NIGERIA and VETIVA INDUSTRIAL

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

By analyzing existing cross correlation between NORTHERN NIGERIA FLOUR and VETIVA INDUSTRIAL ETF, you can compare the effects of market volatilities on NORTHERN NIGERIA and VETIVA INDUSTRIAL 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 NORTHERN NIGERIA with a short position of VETIVA INDUSTRIAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of NORTHERN NIGERIA and VETIVA INDUSTRIAL.

Diversification Opportunities for NORTHERN NIGERIA and VETIVA INDUSTRIAL

-0.48

Correlation Coefficient

NORTHERN NIGERIA  VETIVA INDUSTRIAL

Very good diversification

The 3 months correlation between NORTHERN and VETIVA is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding NORTHERN NIGERIA FLOUR and VETIVA INDUSTRIAL ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VETIVA INDUSTRIAL ETF and NORTHERN NIGERIA 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 NORTHERN NIGERIA FLOUR are associated (or correlated) with VETIVA INDUSTRIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VETIVA INDUSTRIAL ETF has no effect on the direction of NORTHERN NIGERIA i.e., NORTHERN NIGERIA and VETIVA INDUSTRIAL go up and down completely randomly.

Pair Corralation between NORTHERN NIGERIA and VETIVA INDUSTRIAL

Assuming the 90 days trading horizon NORTHERN NIGERIA FLOUR is expected to generate 1.6 times more return on investment than VETIVA INDUSTRIAL. However, NORTHERN NIGERIA is 1.6 times more volatile than VETIVA INDUSTRIAL ETF. It trades about 0.29 of its potential returns per unit of risk. VETIVA INDUSTRIAL ETF is currently generating about -0.03 per unit of risk. If you would invest  3,450  in NORTHERN NIGERIA FLOUR on December 4, 2024 and sell it today you would earn a total of  3,805  from holding NORTHERN NIGERIA FLOUR or generate 110.29% return on investment over 90 days.

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

NORTHERN NIGERIA FLOUR  vs.  VETIVA INDUSTRIAL ETF

NORTHERN NIGERIA FLOUR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NORTHERN NIGERIA FLOUR are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain technical and fundamental indicators, NORTHERN NIGERIA displayed solid returns over the last few months and may actually be approaching a breakup point.

VETIVA INDUSTRIAL ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days VETIVA INDUSTRIAL ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, VETIVA INDUSTRIAL is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with NORTHERN NIGERIA and VETIVA INDUSTRIAL

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

The idea behind NORTHERN NIGERIA FLOUR and VETIVA INDUSTRIAL ETF 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.