Correlation Between Multi Manager and Northern Bond
Can any of the company-specific risk be diversified away by investing in both Multi Manager and Northern Bond 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 Multi Manager and Northern Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Multi Manager Global Real and Northern Bond Index, you can compare the effects of market volatilities on Multi Manager and Northern Bond 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 Multi Manager with a short position of Northern Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multi Manager and Northern Bond.
Diversification Opportunities for Multi Manager and Northern Bond
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Multi and Northern is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Multi Manager Global Real and Northern Bond Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Bond Index and Multi Manager 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 Multi Manager Global Real are associated (or correlated) with Northern Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Bond Index has no effect on the direction of Multi Manager i.e., Multi Manager and Northern Bond go up and down completely randomly.
Pair Corralation between Multi Manager and Northern Bond
Assuming the 90 days horizon Multi Manager Global Real is expected to under-perform the Northern Bond. In addition to that, Multi Manager is 2.44 times more volatile than Northern Bond Index. It trades about -0.06 of its total potential returns per unit of risk. Northern Bond Index is currently generating about 0.19 per unit of volatility. If you would invest 913.00 in Northern Bond Index on September 13, 2024 and sell it today you would earn a total of 9.00 from holding Northern Bond Index or generate 0.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Multi Manager Global Real vs. Northern Bond Index
Performance |
| Timeline |
| Multi Manager Global |
| Northern Bond Index |
Multi Manager and Northern Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Multi Manager and Northern Bond
The main advantage of trading using opposite Multi Manager and Northern Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Multi Manager position performs unexpectedly, Northern Bond 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 Bond will offset losses from the drop in Northern Bond's long position.| Multi Manager vs. Northern Bond Index | Multi Manager vs. Northern E Bond | Multi Manager vs. Northern Arizona Tax Exempt | Multi Manager vs. Northern Emerging Markets |
| Northern Bond vs. Northern E Bond | Northern Bond vs. Northern Arizona Tax Exempt | Northern Bond vs. Northern Emerging Markets | Northern Bond vs. Northern Fixed Income |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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