Correlation Between NBI Active and NBI Sustainable
Can any of the company-specific risk be diversified away by investing in both NBI Active and NBI Sustainable 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 Active and NBI Sustainable into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NBI Active Canadian and NBI Sustainable Global, you can compare the effects of market volatilities on NBI Active and NBI Sustainable 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 Active with a short position of NBI Sustainable. Check out your portfolio center. Please also check ongoing floating volatility patterns of NBI Active and NBI Sustainable.
Diversification Opportunities for NBI Active and NBI Sustainable
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NBI and NBI is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding NBI Active Canadian and NBI Sustainable Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NBI Sustainable Global and NBI Active 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 Active Canadian are associated (or correlated) with NBI Sustainable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NBI Sustainable Global has no effect on the direction of NBI Active i.e., NBI Active and NBI Sustainable go up and down completely randomly.
Pair Corralation between NBI Active and NBI Sustainable
Assuming the 90 days trading horizon NBI Active Canadian is expected to generate 0.28 times more return on investment than NBI Sustainable. However, NBI Active Canadian is 3.53 times less risky than NBI Sustainable. It trades about 0.67 of its potential returns per unit of risk. NBI Sustainable Global is currently generating about 0.19 per unit of risk. If you would invest 2,381 in NBI Active Canadian on October 23, 2024 and sell it today you would earn a total of 81.00 from holding NBI Active Canadian or generate 3.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NBI Active Canadian vs. NBI Sustainable Global
Performance |
| Timeline |
| NBI Active Canadian |
| NBI Sustainable Global |
NBI Active and NBI Sustainable Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NBI Active and NBI Sustainable
The main advantage of trading using opposite NBI Active and NBI Sustainable positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NBI Active position performs unexpectedly, NBI Sustainable 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 NBI Sustainable will offset losses from the drop in NBI Sustainable's long position.| NBI Active vs. TD Active Preferred | NBI Active vs. Dynamic Active Preferred | NBI Active vs. NBI Global Real | NBI Active vs. NBI Liquid Alternatives |
| NBI Sustainable vs. NBI Active Canadian | NBI Sustainable vs. NBI Liquid Alternatives | NBI Sustainable vs. NBI Global Real |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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