Correlation Between Nelnet and RF Acquisition

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

By analyzing existing cross correlation between Nelnet Inc and RF Acquisition Corp, you can compare the effects of market volatilities on Nelnet and RF Acquisition 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 Nelnet with a short position of RF Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nelnet and RF Acquisition.

Diversification Opportunities for Nelnet and RF Acquisition

-0.13

Correlation Coefficient

Nelnet  RF Acquisition

Good diversification

The 3 months correlation between Nelnet and RFAC is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Nelnet Inc and RF Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RF Acquisition Corp and Nelnet 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 Nelnet Inc are associated (or correlated) with RF Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RF Acquisition Corp has no effect on the direction of Nelnet i.e., Nelnet and RF Acquisition go up and down completely randomly.

Pair Corralation between Nelnet and RF Acquisition

Considering the 90-day investment horizon Nelnet Inc is expected to generate 1.0 times more return on investment than RF Acquisition. However, Nelnet is 1.0 times more volatile than RF Acquisition Corp. It trades about 0.03 of its potential returns per unit of risk. RF Acquisition Corp is currently generating about -0.06 per unit of risk. If you would invest  9,371  in Nelnet Inc on October 27, 2024 and sell it today you would earn a total of  1,704  from holding Nelnet Inc or generate 18.18% return on investment over 90 days.

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

Nelnet Inc  vs.  RF Acquisition Corp

Nelnet Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nelnet Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Nelnet is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

RF Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RF Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Nelnet and RF Acquisition

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

The idea behind Nelnet Inc and RF Acquisition Corp 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.