Correlation Between Zapp Electric and NFI

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

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

Diversification Opportunities for Zapp Electric and NFI

-0.26

Correlation Coefficient

Zapp Electric  NFI

Very good diversification

The 3 months correlation between Zapp and NFI is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Zapp Electric Vehicles and NFI Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NFI Group and Zapp Electric 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 Zapp Electric Vehicles 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 Zapp Electric i.e., Zapp Electric and NFI go up and down completely randomly.

Pair Corralation between Zapp Electric and NFI

Assuming the 90 days horizon Zapp Electric Vehicles is expected to generate 1.88 times more return on investment than NFI. However, Zapp Electric is 1.88 times more volatile than NFI Group. It trades about 0.07 of its potential returns per unit of risk. NFI Group is currently generating about -0.01 per unit of risk. If you would invest  0.80  in Zapp Electric Vehicles on December 26, 2024 and sell it today you would earn a total of  0.12  from holding Zapp Electric Vehicles or generate 15.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Zapp Electric Vehicles  vs.  NFI Group

Zapp Electric Vehicles

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zapp Electric Vehicles are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Zapp Electric showed solid returns over the last few months and may actually be approaching a breakup point.

NFI Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days NFI Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, NFI is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Zapp Electric and NFI

The main advantage of trading using opposite Zapp Electric and NFI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zapp Electric 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 Zapp Electric Vehicles 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.