Correlation Between Financial Industries and Neuberger Berman
Can any of the company-specific risk be diversified away by investing in both Financial Industries and Neuberger Berman 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 Financial Industries and Neuberger Berman into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Financial Industries Fund and Neuberger Berman Absolute, you can compare the effects of market volatilities on Financial Industries and Neuberger Berman 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 Financial Industries with a short position of Neuberger Berman. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial Industries and Neuberger Berman.
Diversification Opportunities for Financial Industries and Neuberger Berman
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Financial and Neuberger is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Financial Industries Fund and Neuberger Berman Absolute in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neuberger Berman Absolute and Financial Industries 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 Financial Industries Fund are associated (or correlated) with Neuberger Berman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neuberger Berman Absolute has no effect on the direction of Financial Industries i.e., Financial Industries and Neuberger Berman go up and down completely randomly.
Pair Corralation between Financial Industries and Neuberger Berman
Assuming the 90 days horizon Financial Industries Fund is expected to generate 4.58 times more return on investment than Neuberger Berman. However, Financial Industries is 4.58 times more volatile than Neuberger Berman Absolute. It trades about 0.13 of its potential returns per unit of risk. Neuberger Berman Absolute is currently generating about 0.06 per unit of risk. If you would invest 1,333 in Financial Industries Fund on September 2, 2024 and sell it today you would earn a total of 795.00 from holding Financial Industries Fund or generate 59.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Financial Industries Fund vs. Neuberger Berman Absolute
Performance |
| Timeline |
| Financial Industries |
| Neuberger Berman Absolute |
Financial Industries and Neuberger Berman Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financial Industries and Neuberger Berman
The main advantage of trading using opposite Financial Industries and Neuberger Berman positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial Industries position performs unexpectedly, Neuberger Berman 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 Neuberger Berman will offset losses from the drop in Neuberger Berman's long position.The idea behind Financial Industries Fund and Neuberger Berman Absolute 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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Check out your portfolio center.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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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