Correlation Between Ab Municipal and Northern E
Can any of the company-specific risk be diversified away by investing in both Ab Municipal and Northern E 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 Municipal and Northern E into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ab Municipal Bond and Northern E Bond, you can compare the effects of market volatilities on Ab Municipal and Northern E 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 Municipal with a short position of Northern E. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Municipal and Northern E.
Diversification Opportunities for Ab Municipal and Northern E
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between AUNCX and Northern is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Ab Municipal Bond and Northern E Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern E Bond and Ab Municipal 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 Municipal Bond are associated (or correlated) with Northern E. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern E Bond has no effect on the direction of Ab Municipal i.e., Ab Municipal and Northern E go up and down completely randomly.
Pair Corralation between Ab Municipal and Northern E
Assuming the 90 days horizon Ab Municipal Bond is expected to generate 0.44 times more return on investment than Northern E. However, Ab Municipal Bond is 2.25 times less risky than Northern E. It trades about 0.18 of its potential returns per unit of risk. Northern E Bond is currently generating about 0.02 per unit of risk. If you would invest 1,072 in Ab Municipal Bond on August 29, 2024 and sell it today you would earn a total of 7.00 from holding Ab Municipal Bond or generate 0.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Ab Municipal Bond vs. Northern E Bond
Performance |
| Timeline |
| Ab Municipal Bond |
| Northern E Bond |
Ab Municipal and Northern E Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ab Municipal and Northern E
The main advantage of trading using opposite Ab Municipal and Northern E positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ab Municipal position performs unexpectedly, Northern E 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 E will offset losses from the drop in Northern E's long position.| Ab Municipal vs. Vanguard Limited Term Tax Exempt | Ab Municipal vs. HUMANA INC | Ab Municipal vs. Aquagold International | Ab Municipal vs. Barloworld Ltd ADR |
| Northern E vs. Guidepath Managed Futures | Northern E vs. Ab Municipal Bond | Northern E vs. Oklahoma College Savings | Northern E vs. Arrow Managed Futures |
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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