Correlation Between Northern E and Multi Manager
Can any of the company-specific risk be diversified away by investing in both Northern E and Multi Manager 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 Multi Manager 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 Multi Manager Global Real, you can compare the effects of market volatilities on Northern E and Multi Manager 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 Multi Manager. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern E and Multi Manager.
Diversification Opportunities for Northern E and Multi Manager
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Northern and Multi is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Northern E Bond and Multi Manager Global Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Manager Global 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 Multi Manager. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multi Manager Global has no effect on the direction of Northern E i.e., Northern E and Multi Manager go up and down completely randomly.
Pair Corralation between Northern E and Multi Manager
Assuming the 90 days horizon Northern E Bond is expected to generate 0.42 times more return on investment than Multi Manager. However, Northern E Bond is 2.37 times less risky than Multi Manager. It trades about 0.17 of its potential returns per unit of risk. Multi Manager Global Real is currently generating about -0.06 per unit of risk. If you would invest 885.00 in Northern E Bond on September 13, 2024 and sell it today you would earn a total of 8.00 from holding Northern E Bond or generate 0.9% 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. Multi Manager Global Real
Performance |
| Timeline |
| Northern E Bond |
| Multi Manager Global |
Northern E and Multi Manager Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern E and Multi Manager
The main advantage of trading using opposite Northern E and Multi Manager positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern E position performs unexpectedly, Multi Manager 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 Multi Manager will offset losses from the drop in Multi Manager's long position.| Northern E vs. Northern Bond Index | Northern E vs. Northern Arizona Tax Exempt | Northern E vs. Northern Emerging Markets | Northern E vs. Northern Fixed Income |
| 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 |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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