Correlation Between DNOTES and NLG

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

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

Diversification Opportunities for DNOTES and NLG

0.0

Correlation Coefficient

DNOTES  NLG

Pay attention - limited upside

The 3 months correlation between DNOTES and NLG is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding DNOTES and NLG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NLG and DNOTES 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 DNOTES are associated (or correlated) with NLG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NLG has no effect on the direction of DNOTES i.e., DNOTES and NLG go up and down completely randomly.

Pair Corralation between DNOTES and NLG

If you would invest  0.51  in NLG on September 1, 2024 and sell it today you would earn a total of  0.00  from holding NLG or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

DNOTES  vs.  NLG

DNOTES

Risk-Adjusted Performance

0 of 100

Very Weak

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

NLG

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with DNOTES and NLG

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

The idea behind DNOTES and NLG 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.