Correlation Between NBI Bearings and Global Dominion

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

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

Diversification Opportunities for NBI Bearings and Global Dominion

0.24

Correlation Coefficient

NBI Bearings  Global Dominion

Modest diversification

The 3 months correlation between NBI and Global is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding NBI Bearings Europe and Global Dominion Access in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Dominion Access and NBI Bearings 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 Bearings Europe are associated (or correlated) with Global Dominion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Dominion Access has no effect on the direction of NBI Bearings i.e., NBI Bearings and Global Dominion go up and down completely randomly.

Pair Corralation between NBI Bearings and Global Dominion

Assuming the 90 days trading horizon NBI Bearings Europe is expected to under-perform the Global Dominion. But the stock apears to be less risky and, when comparing its historical volatility, NBI Bearings Europe is 1.39 times less risky than Global Dominion. The stock trades about -0.05 of its potential returns per unit of risk. The Global Dominion Access is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  278.00  in Global Dominion Access on December 4, 2024 and sell it today you would earn a total of  7.00  from holding Global Dominion Access or generate 2.52% return on investment over 90 days.

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

NBI Bearings Europe  vs.  Global Dominion Access

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 rather sound forward indicators, NBI Bearings is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Global Dominion Access

Risk-Adjusted Performance

Insignificant

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.

Pair Trading with NBI Bearings and Global Dominion

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

The idea behind NBI Bearings Europe and Global Dominion Access 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.