Correlation Between Global Dominion and NBI Bearings

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

By analyzing existing cross correlation between Global Dominion Access and NBI Bearings Europe, you can compare the effects of market volatilities on Global Dominion and NBI Bearings 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 Global Dominion with a short position of NBI Bearings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Dominion and NBI Bearings.

Diversification Opportunities for Global Dominion and NBI Bearings

0.33

Correlation Coefficient

Global Dominion  NBI Bearings

Weak diversification

The 3 months correlation between Global and NBI is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Global Dominion Access and NBI Bearings Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NBI Bearings Europe and Global Dominion 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 Global Dominion Access are associated (or correlated) with NBI Bearings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NBI Bearings Europe has no effect on the direction of Global Dominion i.e., Global Dominion and NBI Bearings go up and down completely randomly.

Pair Corralation between Global Dominion and NBI Bearings

Assuming the 90 days trading horizon Global Dominion Access is expected to generate 1.38 times more return on investment than NBI Bearings. However, Global Dominion is 1.38 times more volatile than NBI Bearings Europe. It trades about 0.04 of its potential returns per unit of risk. NBI Bearings Europe is currently generating about -0.12 per unit of risk. If you would invest  279.00  in Global Dominion Access on December 28, 2024 and sell it today you would earn a total of  9.00  from holding Global Dominion Access or generate 3.23% return on investment over 90 days.

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

Global Dominion Access  vs.  NBI Bearings Europe

Global Dominion Access

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Global Dominion Access are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, Global Dominion is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

NBI Bearings Europe

Risk-Adjusted Performance

Very Weak

Over the last 90 days NBI Bearings Europe has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's forward indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Global Dominion and NBI Bearings

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

The idea behind Global Dominion Access and NBI Bearings Europe 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.