Correlation Between NBI Global and IShares Global

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

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

Diversification Opportunities for NBI Global and IShares Global

0.82

Correlation Coefficient

NBI Global  IShares Global

Very poor diversification

The 3 months correlation between NBI and IShares is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding NBI Global Real and iShares Global Infrastructure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Infra and NBI 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 NBI Global Real are associated (or correlated) with IShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global Infra has no effect on the direction of NBI Global i.e., NBI Global and IShares Global go up and down completely randomly.

Pair Corralation between NBI Global and IShares Global

Assuming the 90 days trading horizon NBI Global Real is expected to generate 0.72 times more return on investment than IShares Global. However, NBI Global Real is 1.4 times less risky than IShares Global. It trades about -0.01 of its potential returns per unit of risk. iShares Global Infrastructure is currently generating about -0.07 per unit of risk. If you would invest  2,292  in NBI Global Real on October 7, 2024 and sell it today you would lose (10.00) from holding NBI Global Real or give up 0.44% of portfolio value over 90 days.

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

NBI Global Real  vs.  iShares Global Infrastructure

NBI Global Real

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NBI Global Real are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, NBI Global is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

iShares Global Infra

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Global Infrastructure has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, IShares Global 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 Global and IShares Global

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

The idea behind NBI Global Real and iShares Global Infrastructure 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.