Correlation Between Transat AT and NFI

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

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

Diversification Opportunities for Transat AT and NFI

-0.45

Correlation Coefficient

Transat AT  NFI

Very good diversification

The 3 months correlation between Transat and NFI is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Transat AT and NFI Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NFI Group and Transat AT 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 Transat AT 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 Transat AT i.e., Transat AT and NFI go up and down completely randomly.

Pair Corralation between Transat AT and NFI

Assuming the 90 days trading horizon Transat AT is expected to under-perform the NFI. In addition to that, Transat AT is 1.64 times more volatile than NFI Group. It trades about -0.1 of its total potential returns per unit of risk. NFI Group is currently generating about -0.01 per unit of volatility. If you would invest  1,375  in NFI Group on October 13, 2024 and sell it today you would lose (9.00) from holding NFI Group or give up 0.65% of portfolio value over 90 days.

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

Transat AT  vs.  NFI Group

Transat AT

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Transat AT are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Transat AT may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Transat AT and NFI

The main advantage of trading using opposite Transat AT and NFI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transat AT 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 Transat AT 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.