Correlation Between SHF Holdings and Netcapital

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

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

Diversification Opportunities for SHF Holdings and Netcapital

0.03

Correlation Coefficient

SHF Holdings  Netcapital

Significant diversification

The 3 months correlation between SHF and Netcapital is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding SHF Holdings and Netcapital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netcapital and SHF Holdings 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 SHF Holdings are associated (or correlated) with Netcapital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Netcapital has no effect on the direction of SHF Holdings i.e., SHF Holdings and Netcapital go up and down completely randomly.

Pair Corralation between SHF Holdings and Netcapital

Assuming the 90 days horizon SHF Holdings is expected to generate 3.95 times more return on investment than Netcapital. However, SHF Holdings is 3.95 times more volatile than Netcapital. It trades about 0.14 of its potential returns per unit of risk. Netcapital is currently generating about 0.21 per unit of risk. If you would invest  3.07  in SHF Holdings on September 2, 2024 and sell it today you would lose (0.43) from holding SHF Holdings or give up 14.01% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	73.91%
Values	Daily Returns

SHF Holdings  vs.  Netcapital

SHF Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SHF Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, SHF Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Netcapital

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Netcapital are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting essential indicators, Netcapital showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SHF Holdings and Netcapital

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

The idea behind SHF Holdings and Netcapital 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..