Correlation Between North Star and Neuberger Berman

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

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

Diversification Opportunities for North Star and Neuberger Berman

0.72

Correlation Coefficient

North Star  Neuberger Berman

Poor diversification

The 3 months correlation between North and Neuberger is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding North Star Micro and Neuberger Berman Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neuberger Berman Income and North Star 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 North Star Micro 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 Income has no effect on the direction of North Star i.e., North Star and Neuberger Berman go up and down completely randomly.

Pair Corralation between North Star and Neuberger Berman

Assuming the 90 days horizon North Star Micro is expected to generate 7.04 times more return on investment than Neuberger Berman. However, North Star is 7.04 times more volatile than Neuberger Berman Income. It trades about 0.04 of its potential returns per unit of risk. Neuberger Berman Income is currently generating about 0.18 per unit of risk. If you would invest  3,880  in North Star Micro on September 25, 2024 and sell it today you would earn a total of  254.00  from holding North Star Micro or generate 6.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.21%
Values	Daily Returns

North Star Micro  vs.  Neuberger Berman Income

North Star Micro

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days North Star Micro has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, North Star is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Neuberger Berman Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Neuberger Berman Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Neuberger Berman is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with North Star and Neuberger Berman

The main advantage of trading using opposite North Star and Neuberger Berman positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North Star 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 North Star Micro and Neuberger Berman Income 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.