Correlation Between NBI Unconstrained and Mackenzie Developed

Can any of the company-specific risk be diversified away by investing in both NBI Unconstrained and Mackenzie Developed 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 Mackenzie Developed 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 Mackenzie Developed ex North, you can compare the effects of market volatilities on NBI Unconstrained and Mackenzie Developed 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 Mackenzie Developed. Check out your portfolio center. Please also check ongoing floating volatility patterns of NBI Unconstrained and Mackenzie Developed.

Diversification Opportunities for NBI Unconstrained and Mackenzie Developed

0.64

Correlation Coefficient

NBI Unconstrained  Mackenzie Developed

Poor diversification

The 3 months correlation between NBI and Mackenzie is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding NBI Unconstrained Fixed and Mackenzie Developed ex North in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mackenzie Developed 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 Mackenzie Developed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mackenzie Developed has no effect on the direction of NBI Unconstrained i.e., NBI Unconstrained and Mackenzie Developed go up and down completely randomly.

Pair Corralation between NBI Unconstrained and Mackenzie Developed

Assuming the 90 days trading horizon NBI Unconstrained is expected to generate 2.23 times less return on investment than Mackenzie Developed. In addition to that, NBI Unconstrained is 1.13 times more volatile than Mackenzie Developed ex North. It trades about 0.02 of its total potential returns per unit of risk. Mackenzie Developed ex North is currently generating about 0.06 per unit of volatility. If you would invest  8,904  in Mackenzie Developed ex North on September 3, 2024 and sell it today you would earn a total of  119.00  from holding Mackenzie Developed ex North or generate 1.34% return on investment over 90 days.

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

NBI Unconstrained Fixed  vs.  Mackenzie Developed ex North

NBI Unconstrained Fixed

Risk-Adjusted Performance

1 of 100

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.

Mackenzie Developed

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mackenzie Developed ex North are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Mackenzie Developed 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 Unconstrained and Mackenzie Developed

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

The idea behind NBI Unconstrained Fixed and Mackenzie Developed ex North 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.