Correlation Between Nerdy and OppFi
Can any of the company-specific risk be diversified away by investing in both Nerdy and OppFi 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 Nerdy and OppFi into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nerdy Inc and OppFi Inc, you can compare the effects of market volatilities on Nerdy and OppFi 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 Nerdy with a short position of OppFi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nerdy and OppFi.
Diversification Opportunities for Nerdy and OppFi
Poor diversification
The 3 months correlation between Nerdy and OppFi is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Nerdy Inc and OppFi Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OppFi Inc and Nerdy 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 Nerdy Inc are associated (or correlated) with OppFi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OppFi Inc has no effect on the direction of Nerdy i.e., Nerdy and OppFi go up and down completely randomly.
Pair Corralation between Nerdy and OppFi
Given the investment horizon of 90 days Nerdy Inc is expected to under-perform the OppFi. But the stock apears to be less risky and, when comparing its historical volatility, Nerdy Inc is 1.31 times less risky than OppFi. The stock trades about -0.01 of its potential returns per unit of risk. The OppFi Inc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 765.00 in OppFi Inc on December 27, 2024 and sell it today you would earn a total of 166.50 from holding OppFi Inc or generate 21.76% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Nerdy Inc vs. OppFi Inc
Performance |
Timeline |
Nerdy Inc |
OppFi Inc |
Nerdy and OppFi Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Nerdy and OppFi
The main advantage of trading using opposite Nerdy and OppFi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nerdy position performs unexpectedly, OppFi 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 OppFi will offset losses from the drop in OppFi's long position.The idea behind Nerdy Inc and OppFi Inc 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.Check out your portfolio center.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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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