Correlation Between Ab Value and Northern Small
Can any of the company-specific risk be diversified away by investing in both Ab Value and Northern Small 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 Ab Value and Northern Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ab Value Fund and Northern Small Cap, you can compare the effects of market volatilities on Ab Value and Northern Small 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 Ab Value with a short position of Northern Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Value and Northern Small.
Diversification Opportunities for Ab Value and Northern Small
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between ABVCX and Northern is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Ab Value Fund and Northern Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Small Cap and Ab Value 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 Ab Value Fund are associated (or correlated) with Northern Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Small Cap has no effect on the direction of Ab Value i.e., Ab Value and Northern Small go up and down completely randomly.
Pair Corralation between Ab Value and Northern Small
Assuming the 90 days horizon Ab Value is expected to generate 1.2 times less return on investment than Northern Small. But when comparing it to its historical volatility, Ab Value Fund is 1.67 times less risky than Northern Small. It trades about 0.13 of its potential returns per unit of risk. Northern Small Cap is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,377 in Northern Small Cap on September 4, 2024 and sell it today you would earn a total of 876.00 from holding Northern Small Cap or generate 36.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.66% |
| Values | Daily Returns |
Ab Value Fund vs. Northern Small Cap
Performance |
| Timeline |
| Ab Value Fund |
| Northern Small Cap |
Ab Value and Northern Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ab Value and Northern Small
The main advantage of trading using opposite Ab Value and Northern Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ab Value position performs unexpectedly, Northern Small 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 Northern Small will offset losses from the drop in Northern Small's long position.| Ab Value vs. Balanced Fund Investor | Ab Value vs. T Rowe Price | Ab Value vs. Ab Small Cap | Ab Value vs. Qs Growth Fund |
| Northern Small vs. Northern Bond Index | Northern Small vs. Northern E Bond | Northern Small vs. Northern Fixed Income | Northern Small vs. Northern Income Equity |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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