Correlation Between Open Text and NFI

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

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

Diversification Opportunities for Open Text and NFI

0.42

Correlation Coefficient

Open Text  NFI

Very weak diversification

The 3 months correlation between Open and NFI is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Open Text Corp and NFI Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NFI Group and Open Text 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 Open Text Corp 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 Open Text i.e., Open Text and NFI go up and down completely randomly.

Pair Corralation between Open Text and NFI

Assuming the 90 days trading horizon Open Text Corp is expected to generate 1.15 times more return on investment than NFI. However, Open Text is 1.15 times more volatile than NFI Group. It trades about 0.0 of its potential returns per unit of risk. NFI Group is currently generating about -0.24 per unit of risk. If you would invest  4,308  in Open Text Corp on September 3, 2024 and sell it today you would lose (44.00) from holding Open Text Corp or give up 1.02% of portfolio value over 90 days.

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

Open Text Corp  vs.  NFI Group

Open Text Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Open Text Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Open Text is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

NFI Group

Risk-Adjusted Performance

0 of 100

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 unfluctuating performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Open Text and NFI

The main advantage of trading using opposite Open Text and NFI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Open Text 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 Open Text Corp 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.