Correlation Between NBI High and MegaShort

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

By analyzing existing cross correlation between NBI High Yield and MegaShort SP 500, you can compare the effects of market volatilities on NBI High and MegaShort 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 NBI High with a short position of MegaShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of NBI High and MegaShort.

Diversification Opportunities for NBI High and MegaShort

0.17

Correlation Coefficient

NBI High  MegaShort

Average diversification

The 3 months correlation between NBI and MegaShort is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding NBI High Yield and MegaShort SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MegaShort SP 500 and NBI High 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 NBI High Yield are associated (or correlated) with MegaShort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MegaShort SP 500 has no effect on the direction of NBI High i.e., NBI High and MegaShort go up and down completely randomly.

Pair Corralation between NBI High and MegaShort

Assuming the 90 days trading horizon NBI High Yield is expected to generate 0.24 times more return on investment than MegaShort. However, NBI High Yield is 4.16 times less risky than MegaShort. It trades about 0.15 of its potential returns per unit of risk. MegaShort SP 500 is currently generating about -0.31 per unit of risk. If you would invest  2,113  in NBI High Yield on April 25, 2025 and sell it today you would earn a total of  92.00  from holding NBI High Yield or generate 4.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	69.35%
Values	Daily Returns

NBI High Yield  vs.  MegaShort SP 500

NBI High Yield

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NBI High Yield are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, NBI High is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

MegaShort SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days MegaShort SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Etf's basic indicators remain very healthy which may send shares a bit higher in August 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

Pair Trading with NBI High and MegaShort

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

The idea behind NBI High Yield and MegaShort SP 500 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.