Correlation Between Vanguard and NBI High
Can any of the company-specific risk be diversified away by investing in both Vanguard and NBI High 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 Vanguard and NBI High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard SP 500 and NBI High Yield, you can compare the effects of market volatilities on Vanguard and NBI High 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 Vanguard with a short position of NBI High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and NBI High.
Diversification Opportunities for Vanguard and NBI High
Poor diversification
The 3 months correlation between Vanguard and NBI is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 and NBI High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NBI High Yield and Vanguard 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 Vanguard SP 500 are associated (or correlated) with NBI High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NBI High Yield has no effect on the direction of Vanguard i.e., Vanguard and NBI High go up and down completely randomly.
Pair Corralation between Vanguard and NBI High
Assuming the 90 days trading horizon Vanguard SP 500 is expected to generate 0.38 times more return on investment than NBI High. However, Vanguard SP 500 is 2.64 times less risky than NBI High. It trades about 0.16 of its potential returns per unit of risk. NBI High Yield is currently generating about 0.03 per unit of risk. If you would invest 10,014 in Vanguard SP 500 on August 31, 2024 and sell it today you would earn a total of 5,022 from holding Vanguard SP 500 or generate 50.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 87.13% |
| Values | Daily Returns |
Vanguard SP 500 vs. NBI High Yield
Performance |
| Timeline |
| Vanguard SP 500 |
| NBI High Yield |
Vanguard and NBI High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard and NBI High
The main advantage of trading using opposite Vanguard and NBI High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard position performs unexpectedly, NBI High 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 High will offset losses from the drop in NBI High's long position.| Vanguard vs. Vanguard FTSE Canadian | Vanguard vs. Vanguard Growth Portfolio | Vanguard vs. Vanguard SP 500 | Vanguard vs. Vanguard FTSE Canada |
| NBI High vs. NBI Unconstrained Fixed | NBI High vs. NBI Active Canadian | NBI High vs. NBI Sustainable Canadian | NBI High vs. Picton Mahoney Fortified |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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