Correlation Between Northern High and Northern Large
Can any of the company-specific risk be diversified away by investing in both Northern High and Northern Large 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 High and Northern Large into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern High Yield and Northern Large Cap, you can compare the effects of market volatilities on Northern High and Northern Large 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 High with a short position of Northern Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern High and Northern Large.
Diversification Opportunities for Northern High and Northern Large
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Northern and Northern is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Northern High Yield and Northern Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Large Cap and Northern High 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 High Yield are associated (or correlated) with Northern Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Large Cap has no effect on the direction of Northern High i.e., Northern High and Northern Large go up and down completely randomly.
Pair Corralation between Northern High and Northern Large
Assuming the 90 days horizon Northern High Yield is expected to generate 0.34 times more return on investment than Northern Large. However, Northern High Yield is 2.92 times less risky than Northern Large. It trades about 0.06 of its potential returns per unit of risk. Northern Large Cap is currently generating about -0.15 per unit of risk. If you would invest 605.00 in Northern High Yield on December 6, 2024 and sell it today you would earn a total of 2.00 from holding Northern High Yield or generate 0.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Northern High Yield vs. Northern Large Cap
Performance |
| Timeline |
| Northern High Yield |
| Northern Large Cap |
Northern High and Northern Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern High and Northern Large
The main advantage of trading using opposite Northern High and Northern Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern High position performs unexpectedly, Northern Large 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 Large will offset losses from the drop in Northern Large's long position.| Northern High vs. Northern Emerging Markets | Northern High vs. Northern Global Real | Northern High vs. Northern International Equity | Northern High vs. Northern Small Cap |
| Northern Large vs. Bbh Intermediate Municipal | Northern Large vs. Pace Municipal Fixed | Northern Large vs. Ab Municipal Bond | Northern Large vs. Legg Mason Partners |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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