Correlation Between NPF MICRO and VFD GROUP

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

By analyzing existing cross correlation between NPF MICRO FINANCE and VFD GROUP, you can compare the effects of market volatilities on NPF MICRO and VFD GROUP 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 NPF MICRO with a short position of VFD GROUP. Check out your portfolio center. Please also check ongoing floating volatility patterns of NPF MICRO and VFD GROUP.

Diversification Opportunities for NPF MICRO and VFD GROUP

0.36

Correlation Coefficient

NPF MICRO  VFD GROUP

Weak diversification

The 3 months correlation between NPF and VFD is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding NPF MICRO FINANCE and VFD GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VFD GROUP and NPF MICRO 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 NPF MICRO FINANCE are associated (or correlated) with VFD GROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VFD GROUP has no effect on the direction of NPF MICRO i.e., NPF MICRO and VFD GROUP go up and down completely randomly.

Pair Corralation between NPF MICRO and VFD GROUP

Assuming the 90 days trading horizon NPF MICRO is expected to generate 1.53 times less return on investment than VFD GROUP. In addition to that, NPF MICRO is 1.03 times more volatile than VFD GROUP. It trades about 0.11 of its total potential returns per unit of risk. VFD GROUP is currently generating about 0.17 per unit of volatility. If you would invest  4,050  in VFD GROUP on November 29, 2024 and sell it today you would earn a total of  1,190  from holding VFD GROUP or generate 29.38% return on investment over 90 days.

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

NPF MICRO FINANCE  vs.  VFD GROUP

NPF MICRO FINANCE

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NPF MICRO FINANCE are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady fundamental drivers, NPF MICRO reported solid returns over the last few months and may actually be approaching a breakup point.

VFD GROUP

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VFD GROUP are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, VFD GROUP unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NPF MICRO and VFD GROUP

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

The idea behind NPF MICRO FINANCE and VFD GROUP 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..