Correlation Between NBI Liquid and NBI Unconstrained

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

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

Diversification Opportunities for NBI Liquid and NBI Unconstrained

0.1

Correlation Coefficient

NBI Liquid  NBI Unconstrained

Average diversification

The 3 months correlation between NBI and NBI is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding NBI Liquid Alternatives 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 NBI Liquid 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 NBI Liquid Alternatives 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 NBI Liquid i.e., NBI Liquid and NBI Unconstrained go up and down completely randomly.

Pair Corralation between NBI Liquid and NBI Unconstrained

Assuming the 90 days trading horizon NBI Liquid Alternatives is expected to generate 1.53 times more return on investment than NBI Unconstrained. However, NBI Liquid is 1.53 times more volatile than NBI Unconstrained Fixed. It trades about 0.02 of its potential returns per unit of risk. NBI Unconstrained Fixed is currently generating about 0.02 per unit of risk. If you would invest  2,204  in NBI Liquid Alternatives on November 29, 2024 and sell it today you would earn a total of  13.00  from holding NBI Liquid Alternatives or generate 0.59% return on investment over 90 days.

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

NBI Liquid Alternatives  vs.  NBI Unconstrained Fixed

NBI Liquid Alternatives

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NBI Liquid Alternatives are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, NBI Liquid 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

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NBI Unconstrained Fixed are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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 NBI Liquid and NBI Unconstrained

The main advantage of trading using opposite NBI Liquid and NBI Unconstrained positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NBI Liquid 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 NBI Liquid Alternatives 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.