Correlation Between Northern E and Northern Global
Can any of the company-specific risk be diversified away by investing in both Northern E and Northern Global 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 E and Northern Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern E Bond and Northern Global Real, you can compare the effects of market volatilities on Northern E and Northern Global 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 E with a short position of Northern Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern E and Northern Global.
Diversification Opportunities for Northern E and Northern Global
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Northern and Northern is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Northern E Bond and Northern Global Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Global Real and Northern E 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 E Bond are associated (or correlated) with Northern Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Global Real has no effect on the direction of Northern E i.e., Northern E and Northern Global go up and down completely randomly.
Pair Corralation between Northern E and Northern Global
Assuming the 90 days horizon Northern E Bond is expected to generate 0.46 times more return on investment than Northern Global. However, Northern E Bond is 2.17 times less risky than Northern Global. It trades about 0.02 of its potential returns per unit of risk. Northern Global Real is currently generating about 0.0 per unit of risk. If you would invest 890.00 in Northern E Bond on August 29, 2024 and sell it today you would earn a total of 1.00 from holding Northern E Bond or generate 0.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern E Bond vs. Northern Global Real
Performance |
| Timeline |
| Northern E Bond |
| Northern Global Real |
Northern E and Northern Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern E and Northern Global
The main advantage of trading using opposite Northern E and Northern Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern E position performs unexpectedly, Northern Global 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 Global will offset losses from the drop in Northern Global's long position.| Northern E vs. Guidepath Managed Futures | Northern E vs. Ab Municipal Bond | Northern E vs. Oklahoma College Savings | Northern E vs. Arrow Managed Futures |
| Northern Global vs. Blackrock High Yield | Northern Global vs. Lord Abbett High | Northern Global vs. Victory High Yield | Northern Global vs. Dunham High Yield |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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