Correlation Between MegaShort and NBI Unconstrained

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

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

Diversification Opportunities for MegaShort and NBI Unconstrained

0.27

Correlation Coefficient

MegaShort  NBI Unconstrained

Modest diversification

The 3 months correlation between MegaShort and NBI is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding MegaShort SP 500 and NBI Unconstrained Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NBI Unconstrained Fixed and MegaShort 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 MegaShort SP 500 are associated (or correlated) with NBI Unconstrained. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NBI Unconstrained Fixed has no effect on the direction of MegaShort i.e., MegaShort and NBI Unconstrained go up and down completely randomly.

Pair Corralation between MegaShort and NBI Unconstrained

Assuming the 90 days trading horizon MegaShort SP 500 is expected to under-perform the NBI Unconstrained. In addition to that, MegaShort is 5.44 times more volatile than NBI Unconstrained Fixed. It trades about -0.28 of its total potential returns per unit of risk. NBI Unconstrained Fixed is currently generating about 0.15 per unit of volatility. If you would invest  2,057  in NBI Unconstrained Fixed on April 20, 2025 and sell it today you would earn a total of  71.00  from holding NBI Unconstrained Fixed or generate 3.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	63.49%
Values	Daily Returns

MegaShort SP 500  vs.  NBI Unconstrained Fixed

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.

NBI Unconstrained Fixed

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NBI Unconstrained Fixed are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, NBI Unconstrained is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with MegaShort and NBI Unconstrained

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

The idea behind MegaShort SP 500 and NBI Unconstrained Fixed 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.