Correlation Between Northern Emerging and Northern Fixed
Can any of the company-specific risk be diversified away by investing in both Northern Emerging and Northern Fixed 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 Emerging and Northern Fixed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Emerging Markets and Northern Fixed Income, you can compare the effects of market volatilities on Northern Emerging and Northern Fixed 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 Emerging with a short position of Northern Fixed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Emerging and Northern Fixed.
Diversification Opportunities for Northern Emerging and Northern Fixed
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Northern and Northern is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Northern Emerging Markets and Northern Fixed Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Fixed Income and Northern Emerging 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 Emerging Markets are associated (or correlated) with Northern Fixed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Fixed Income has no effect on the direction of Northern Emerging i.e., Northern Emerging and Northern Fixed go up and down completely randomly.
Pair Corralation between Northern Emerging and Northern Fixed
Assuming the 90 days horizon Northern Emerging Markets is expected to generate 2.74 times more return on investment than Northern Fixed. However, Northern Emerging is 2.74 times more volatile than Northern Fixed Income. It trades about 0.04 of its potential returns per unit of risk. Northern Fixed Income is currently generating about 0.02 per unit of risk. If you would invest 1,070 in Northern Emerging Markets on August 25, 2024 and sell it today you would earn a total of 93.00 from holding Northern Emerging Markets or generate 8.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Emerging Markets vs. Northern Fixed Income
Performance |
| Timeline |
| Northern Emerging Markets |
| Northern Fixed Income |
Northern Emerging and Northern Fixed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Emerging and Northern Fixed
The main advantage of trading using opposite Northern Emerging and Northern Fixed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Emerging position performs unexpectedly, Northern Fixed 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 Fixed will offset losses from the drop in Northern Fixed's long position.| Northern Emerging vs. Blackrock High Yield | Northern Emerging vs. Virtus High Yield | Northern Emerging vs. Ppm High Yield | Northern Emerging vs. Pace High Yield |
| Northern Fixed vs. Northern Bond Index | Northern Fixed vs. Northern E Bond | Northern Fixed vs. Northern Arizona Tax Exempt | Northern Fixed 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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