Correlation Between Northern High and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Northern High and Dow Jones 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 Dow Jones 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 Dow Jones Industrial, you can compare the effects of market volatilities on Northern High and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern High and Dow Jones.
Diversification Opportunities for Northern High and Dow Jones
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Northern and Dow is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Northern High Yield and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Northern High i.e., Northern High and Dow Jones go up and down completely randomly.
Pair Corralation between Northern High and Dow Jones
Assuming the 90 days horizon Northern High Yield is expected to under-perform the Dow Jones. But the mutual fund apears to be less risky and, when comparing its historical volatility, Northern High Yield is 3.47 times less risky than Dow Jones. The mutual fund trades about -0.23 of its potential returns per unit of risk. The Dow Jones Industrial is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 4,472,206 in Dow Jones Industrial on November 27, 2024 and sell it today you would lose (126,085) from holding Dow Jones Industrial or give up 2.82% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 83.05% |
| Values | Daily Returns |
Northern High Yield vs. Dow Jones Industrial
Performance |
| Timeline |
Northern High and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Northern High Yield
Pair trading matchups for Northern High
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Northern High and Dow Jones
The main advantage of trading using opposite Northern High and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern High position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Northern High vs. Northern High Yield | Northern High vs. Northern Tax Exempt Fund | Northern High vs. Northern Intermediate Tax Exempt | Northern High vs. High Yield Municipal Fund |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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