Correlation Between Northern Emerging and Northern Mid
Can any of the company-specific risk be diversified away by investing in both Northern Emerging and Northern Mid 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 Mid 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 Mid Cap, you can compare the effects of market volatilities on Northern Emerging and Northern Mid 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 Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Emerging and Northern Mid.
Diversification Opportunities for Northern Emerging and Northern Mid
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Northern and Northern is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Northern Emerging Markets and Northern Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Mid Cap 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 Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Mid Cap has no effect on the direction of Northern Emerging i.e., Northern Emerging and Northern Mid go up and down completely randomly.
Pair Corralation between Northern Emerging and Northern Mid
Assuming the 90 days horizon Northern Emerging is expected to generate 2.1 times less return on investment than Northern Mid. But when comparing it to its historical volatility, Northern Emerging Markets is 1.23 times less risky than Northern Mid. It trades about 0.04 of its potential returns per unit of risk. Northern Mid Cap is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,762 in Northern Mid Cap on August 29, 2024 and sell it today you would earn a total of 690.00 from holding Northern Mid Cap or generate 39.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Emerging Markets vs. Northern Mid Cap
Performance |
| Timeline |
| Northern Emerging Markets |
| Northern Mid Cap |
Northern Emerging and Northern Mid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Emerging and Northern Mid
The main advantage of trading using opposite Northern Emerging and Northern Mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Emerging position performs unexpectedly, Northern Mid 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 Mid will offset losses from the drop in Northern Mid's long position.| Northern Emerging vs. Nasdaq 100 2x Strategy | Northern Emerging vs. Rbc Bluebay Emerging | Northern Emerging vs. Dws Emerging Markets | Northern Emerging vs. Siit Emerging Markets |
| Northern Mid vs. Northern Small Cap | Northern Mid vs. Northern International Equity | Northern Mid vs. Northern Stock Index | Northern Mid 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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