Correlation Between VFD GROUP and NPF MICRO

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

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

Diversification Opportunities for VFD GROUP and NPF MICRO

0.36

Correlation Coefficient

VFD GROUP  NPF MICRO

Weak diversification

The 3 months correlation between VFD and NPF is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding VFD GROUP and NPF MICRO FINANCE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NPF MICRO FINANCE and VFD GROUP 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 VFD GROUP are associated (or correlated) with NPF MICRO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NPF MICRO FINANCE has no effect on the direction of VFD GROUP i.e., VFD GROUP and NPF MICRO go up and down completely randomly.

Pair Corralation between VFD GROUP and NPF MICRO

Assuming the 90 days trading horizon VFD GROUP is expected to generate 0.97 times more return on investment than NPF MICRO. However, VFD GROUP is 1.03 times less risky than NPF MICRO. It trades about 0.17 of its potential returns per unit of risk. NPF MICRO FINANCE is currently generating about 0.11 per unit of risk. If you would invest  4,050  in VFD GROUP on November 29, 2024 and sell it today you would earn a total of  1,190  from holding VFD GROUP or generate 29.38% return on investment over 90 days.

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

VFD GROUP  vs.  NPF MICRO FINANCE

VFD GROUP

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VFD GROUP are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, VFD GROUP unveiled solid returns over the last few months and may actually be approaching a breakup point.

NPF MICRO FINANCE

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NPF MICRO FINANCE are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady fundamental drivers, NPF MICRO reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VFD GROUP and NPF MICRO

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

The idea behind VFD GROUP and NPF MICRO FINANCE 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.