Correlation Between NBI Sustainable and Vanguard Canadian

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

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

Diversification Opportunities for NBI Sustainable and Vanguard Canadian

0.87

Correlation Coefficient

NBI Sustainable  Vanguard Canadian

Very poor diversification

The 3 months correlation between NBI and Vanguard is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding NBI Sustainable Canadian and Vanguard Canadian Corporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Canadian and NBI Sustainable 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 Sustainable Canadian are associated (or correlated) with Vanguard Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Canadian has no effect on the direction of NBI Sustainable i.e., NBI Sustainable and Vanguard Canadian go up and down completely randomly.

Pair Corralation between NBI Sustainable and Vanguard Canadian

Assuming the 90 days trading horizon NBI Sustainable is expected to generate 1.05 times less return on investment than Vanguard Canadian. In addition to that, NBI Sustainable is 1.35 times more volatile than Vanguard Canadian Corporate. It trades about 0.07 of its total potential returns per unit of risk. Vanguard Canadian Corporate is currently generating about 0.11 per unit of volatility. If you would invest  2,401  in Vanguard Canadian Corporate on December 30, 2024 and sell it today you would earn a total of  41.00  from holding Vanguard Canadian Corporate or generate 1.71% return on investment over 90 days.

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

NBI Sustainable Canadian  vs.  Vanguard Canadian Corporate

NBI Sustainable Canadian

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NBI Sustainable Canadian are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, NBI Sustainable is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Vanguard Canadian

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Canadian Corporate are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, Vanguard Canadian 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 Sustainable and Vanguard Canadian

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

The idea behind NBI Sustainable Canadian and Vanguard Canadian Corporate 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.