Correlation Between IShares Core and NBI Liquid

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

By analyzing existing cross correlation between iShares Core SPTSX and NBI Liquid Alternatives, you can compare the effects of market volatilities on IShares Core and NBI Liquid 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 IShares Core with a short position of NBI Liquid. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and NBI Liquid.

Diversification Opportunities for IShares Core and NBI Liquid

-0.85

Correlation Coefficient

IShares Core  NBI Liquid

Pay attention - limited upside

The 3 months correlation between IShares and NBI is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SPTSX and NBI Liquid Alternatives in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NBI Liquid Alternatives and IShares Core 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 iShares Core SPTSX are associated (or correlated) with NBI Liquid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NBI Liquid Alternatives has no effect on the direction of IShares Core i.e., IShares Core and NBI Liquid go up and down completely randomly.

Pair Corralation between IShares Core and NBI Liquid

Assuming the 90 days trading horizon iShares Core SPTSX is expected to generate 0.97 times more return on investment than NBI Liquid. However, iShares Core SPTSX is 1.03 times less risky than NBI Liquid. It trades about 0.36 of its potential returns per unit of risk. NBI Liquid Alternatives is currently generating about -0.16 per unit of risk. If you would invest  3,658  in iShares Core SPTSX on September 3, 2024 and sell it today you would earn a total of  441.00  from holding iShares Core SPTSX or generate 12.06% return on investment over 90 days.

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

iShares Core SPTSX  vs.  NBI Liquid Alternatives

iShares Core SPTSX

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SPTSX are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, IShares Core may actually be approaching a critical reversion point that can send shares even higher in January 2025.

NBI Liquid Alternatives

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NBI Liquid Alternatives has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, NBI Liquid is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares Core and NBI Liquid

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

The idea behind iShares Core SPTSX and NBI Liquid Alternatives 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.