Correlation Between NBI Unconstrained and Fidelity LongShort

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

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

Diversification Opportunities for NBI Unconstrained and Fidelity LongShort

0.07

Correlation Coefficient

NBI Unconstrained  Fidelity LongShort

Significant diversification

The 3 months correlation between NBI and Fidelity is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding NBI Unconstrained Fixed and Fidelity LongShort Alternative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity LongShort and NBI Unconstrained 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 Unconstrained Fixed are associated (or correlated) with Fidelity LongShort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity LongShort has no effect on the direction of NBI Unconstrained i.e., NBI Unconstrained and Fidelity LongShort go up and down completely randomly.

Pair Corralation between NBI Unconstrained and Fidelity LongShort

Assuming the 90 days trading horizon NBI Unconstrained is expected to generate 5.15 times less return on investment than Fidelity LongShort. But when comparing it to its historical volatility, NBI Unconstrained Fixed is 1.3 times less risky than Fidelity LongShort. It trades about 0.03 of its potential returns per unit of risk. Fidelity LongShort Alternative is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,012  in Fidelity LongShort Alternative on October 4, 2024 and sell it today you would earn a total of  156.00  from holding Fidelity LongShort Alternative or generate 15.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	46.06%
Values	Daily Returns

NBI Unconstrained Fixed  vs.  Fidelity LongShort Alternative

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.

Fidelity LongShort

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity LongShort Alternative are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Fidelity LongShort is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with NBI Unconstrained and Fidelity LongShort

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

The idea behind NBI Unconstrained Fixed and Fidelity LongShort Alternative 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.