Correlation Between Forstrong Global and NBI Unconstrained

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

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

Diversification Opportunities for Forstrong Global and NBI Unconstrained

0.16

Correlation Coefficient

Forstrong Global  NBI Unconstrained

Average diversification

The 3 months correlation between Forstrong and NBI is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Forstrong Global Income and NBI Unconstrained Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NBI Unconstrained Fixed and Forstrong Global 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 Forstrong Global Income are associated (or correlated) with NBI Unconstrained. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NBI Unconstrained Fixed has no effect on the direction of Forstrong Global i.e., Forstrong Global and NBI Unconstrained go up and down completely randomly.

Pair Corralation between Forstrong Global and NBI Unconstrained

Assuming the 90 days trading horizon Forstrong Global Income is expected to generate 1.09 times more return on investment than NBI Unconstrained. However, Forstrong Global is 1.09 times more volatile than NBI Unconstrained Fixed. It trades about -0.21 of its potential returns per unit of risk. NBI Unconstrained Fixed is currently generating about -0.27 per unit of risk. If you would invest  2,189  in Forstrong Global Income on October 5, 2024 and sell it today you would lose (30.00) from holding Forstrong Global Income or give up 1.37% of portfolio value over 90 days.

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

Forstrong Global Income  vs.  NBI Unconstrained Fixed

Forstrong Global Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Forstrong Global Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Forstrong Global is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

NBI Unconstrained Fixed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NBI Unconstrained Fixed has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, NBI Unconstrained is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Forstrong Global and NBI Unconstrained

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

The idea behind Forstrong Global Income and NBI Unconstrained Fixed 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.