Correlation Between Northland Power and NFI

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

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

Diversification Opportunities for Northland Power and NFI

0.11

Correlation Coefficient

Northland Power  NFI

Average diversification

The 3 months correlation between Northland and NFI is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Northland Power and NFI Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NFI Group and Northland Power 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 Northland Power are associated (or correlated) with NFI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NFI Group has no effect on the direction of Northland Power i.e., Northland Power and NFI go up and down completely randomly.

Pair Corralation between Northland Power and NFI

Assuming the 90 days trading horizon Northland Power is expected to generate 0.47 times more return on investment than NFI. However, Northland Power is 2.11 times less risky than NFI. It trades about 0.1 of its potential returns per unit of risk. NFI Group is currently generating about -0.04 per unit of risk. If you would invest  1,760  in Northland Power on December 30, 2024 and sell it today you would earn a total of  207.00  from holding Northland Power or generate 11.76% return on investment over 90 days.

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

Northland Power  vs.  NFI Group

Northland Power

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Northland Power are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, Northland Power may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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. In spite of latest unfluctuating performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Northland Power and NFI

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

The idea behind Northland Power and NFI 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..