Correlation Between Global Gold and Northern Global
Can any of the company-specific risk be diversified away by investing in both Global Gold and Northern Global 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 Global Gold and Northern Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Gold Fund and Northern Global Tactical, you can compare the effects of market volatilities on Global Gold and Northern Global 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 Global Gold with a short position of Northern Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Gold and Northern Global.
Diversification Opportunities for Global Gold and Northern Global
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Global and Northern is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Global Gold Fund and Northern Global Tactical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Global Tactical and Global Gold 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 Global Gold Fund are associated (or correlated) with Northern Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Global Tactical has no effect on the direction of Global Gold i.e., Global Gold and Northern Global go up and down completely randomly.
Pair Corralation between Global Gold and Northern Global
Assuming the 90 days horizon Global Gold Fund is expected to generate 4.65 times more return on investment than Northern Global. However, Global Gold is 4.65 times more volatile than Northern Global Tactical. It trades about 0.15 of its potential returns per unit of risk. Northern Global Tactical is currently generating about 0.14 per unit of risk. If you would invest 1,235 in Global Gold Fund on September 13, 2024 and sell it today you would earn a total of 61.00 from holding Global Gold Fund or generate 4.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Gold Fund vs. Northern Global Tactical
Performance |
| Timeline |
| Global Gold Fund |
| Northern Global Tactical |
Global Gold and Northern Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Gold and Northern Global
The main advantage of trading using opposite Global Gold and Northern Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Gold position performs unexpectedly, Northern Global 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 Global will offset losses from the drop in Northern Global's long position.| Global Gold vs. Equity Growth Fund | Global Gold vs. Income Growth Fund | Global Gold vs. Diversified Bond Fund | Global Gold vs. Emerging Markets Fund |
| Northern Global vs. Needham Aggressive Growth | Northern Global vs. Ftfa Franklin Templeton Growth | Northern Global vs. L Abbett Growth | Northern Global vs. Pace Smallmedium Growth |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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