Correlation Between Northern Global and Northern Emerging
Can any of the company-specific risk be diversified away by investing in both Northern Global and Northern Emerging 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 Northern Global and Northern Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Global Tactical and Northern Emerging Markets, you can compare the effects of market volatilities on Northern Global and Northern Emerging 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 Northern Global with a short position of Northern Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Global and Northern Emerging.
Diversification Opportunities for Northern Global and Northern Emerging
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Northern and Northern is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Northern Global Tactical and Northern Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Emerging Markets and Northern Global 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 Northern Global Tactical are associated (or correlated) with Northern Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Emerging Markets has no effect on the direction of Northern Global i.e., Northern Global and Northern Emerging go up and down completely randomly.
Pair Corralation between Northern Global and Northern Emerging
Assuming the 90 days horizon Northern Global Tactical is expected to generate 0.49 times more return on investment than Northern Emerging. However, Northern Global Tactical is 2.04 times less risky than Northern Emerging. It trades about 0.23 of its potential returns per unit of risk. Northern Emerging Markets is currently generating about -0.14 per unit of risk. If you would invest 1,307 in Northern Global Tactical on September 1, 2024 and sell it today you would earn a total of 29.00 from holding Northern Global Tactical or generate 2.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Northern Global Tactical vs. Northern Emerging Markets
Performance |
| Timeline |
| Northern Global Tactical |
| Northern Emerging Markets |
Northern Global and Northern Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Global and Northern Emerging
The main advantage of trading using opposite Northern Global and Northern Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Global position performs unexpectedly, Northern Emerging 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 Emerging will offset losses from the drop in Northern Emerging's long position.| Northern Global vs. Northern Bond Index | Northern Global vs. Northern E Bond | Northern Global vs. Northern Arizona Tax Exempt | Northern Global vs. Northern Emerging Markets |
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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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