Correlation Between Lifestyle and Northern Fixed
Can any of the company-specific risk be diversified away by investing in both Lifestyle and Northern Fixed 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 Lifestyle and Northern Fixed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lifestyle Ii Moderate and Northern Fixed Income, you can compare the effects of market volatilities on Lifestyle and Northern Fixed 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 Lifestyle with a short position of Northern Fixed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lifestyle and Northern Fixed.
Diversification Opportunities for Lifestyle and Northern Fixed
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Lifestyle and Northern is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Lifestyle Ii Moderate and Northern Fixed Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Fixed Income and Lifestyle 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 Lifestyle Ii Moderate are associated (or correlated) with Northern Fixed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Fixed Income has no effect on the direction of Lifestyle i.e., Lifestyle and Northern Fixed go up and down completely randomly.
Pair Corralation between Lifestyle and Northern Fixed
Assuming the 90 days horizon Lifestyle Ii Moderate is expected to generate 1.13 times more return on investment than Northern Fixed. However, Lifestyle is 1.13 times more volatile than Northern Fixed Income. It trades about 0.15 of its potential returns per unit of risk. Northern Fixed Income is currently generating about 0.1 per unit of risk. If you would invest 1,046 in Lifestyle Ii Moderate on August 29, 2024 and sell it today you would earn a total of 72.00 from holding Lifestyle Ii Moderate or generate 6.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lifestyle Ii Moderate vs. Northern Fixed Income
Performance |
| Timeline |
| Lifestyle Ii Moderate |
| Northern Fixed Income |
Lifestyle and Northern Fixed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lifestyle and Northern Fixed
The main advantage of trading using opposite Lifestyle and Northern Fixed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lifestyle position performs unexpectedly, Northern Fixed 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 Fixed will offset losses from the drop in Northern Fixed's long position.| Lifestyle vs. Regional Bank Fund | Lifestyle vs. Regional Bank Fund | Lifestyle vs. Multimanager Lifestyle Balanced | Lifestyle vs. Multimanager Lifestyle Aggressive |
| Northern Fixed vs. Transamerica Cleartrack Retirement | Northern Fixed vs. Lifestyle Ii Moderate | Northern Fixed vs. Moderately Aggressive Balanced | Northern Fixed vs. Saat Moderate Strategy |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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