Can any of the company-specific risk be diversified away by investing in both BANORT and NikolaCorp 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 BANORT and NikolaCorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BANORT 8 38 and NikolaCorp, you can compare the effects of market volatilities on BANORT and NikolaCorp 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 BANORT with a short position of NikolaCorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of BANORT and NikolaCorp.
Diversification Opportunities for BANORT and NikolaCorp
The 3 months correlation between BANORT and NikolaCorp is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding BANORT 8 3/8 PERP and NikolaCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NikolaCorp and BANORT 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 BANORT 8 38 are associated (or correlated) with NikolaCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NikolaCorp has no effect on the direction of BANORT i.e., BANORT and NikolaCorp go up and down completely randomly.
Over the last 90 days BANORT 8 38 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BANORT is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Over the last 90 days NikolaCorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, NikolaCorp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
The main advantage of trading using opposite BANORT and NikolaCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BANORT position performs unexpectedly, NikolaCorp 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 NikolaCorp will offset losses from the drop in NikolaCorp's long position.
The idea behind BANORT 8 38 and NikolaCorp 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.
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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