Correlation Between Barings BDC and Nelnet

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

By analyzing existing cross correlation between Barings BDC and Nelnet Inc, you can compare the effects of market volatilities on Barings BDC and Nelnet 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 Barings BDC with a short position of Nelnet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barings BDC and Nelnet.

Diversification Opportunities for Barings BDC and Nelnet

-0.53

Correlation Coefficient

Barings BDC  Nelnet

Excellent diversification

The 3 months correlation between Barings and Nelnet is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Barings BDC and Nelnet Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nelnet Inc and Barings BDC 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 Barings BDC are associated (or correlated) with Nelnet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nelnet Inc has no effect on the direction of Barings BDC i.e., Barings BDC and Nelnet go up and down completely randomly.

Pair Corralation between Barings BDC and Nelnet

Given the investment horizon of 90 days Barings BDC is expected to generate 0.85 times more return on investment than Nelnet. However, Barings BDC is 1.17 times less risky than Nelnet. It trades about 0.07 of its potential returns per unit of risk. Nelnet Inc is currently generating about 0.04 per unit of risk. If you would invest  659.00  in Barings BDC on September 13, 2024 and sell it today you would earn a total of  317.00  from holding Barings BDC or generate 48.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Barings BDC  vs.  Nelnet Inc

Barings BDC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Barings BDC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Barings BDC is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Nelnet Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nelnet Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Nelnet is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Barings BDC and Nelnet

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

The idea behind Barings BDC and Nelnet Inc 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.