Correlation Between Northern Income and Northern Bond
Can any of the company-specific risk be diversified away by investing in both Northern Income 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 Northern Income and Northern Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Income Equity and Northern Bond Index, you can compare the effects of market volatilities on Northern Income 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 Northern Income with a short position of Northern Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Income and Northern Bond.
Diversification Opportunities for Northern Income and Northern Bond
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Northern and Northern is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Northern Income Equity 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 Northern Income 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 Income Equity 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 Northern Income i.e., Northern Income and Northern Bond go up and down completely randomly.
Pair Corralation between Northern Income and Northern Bond
Assuming the 90 days horizon Northern Income Equity is expected to generate 2.06 times more return on investment than Northern Bond. However, Northern Income is 2.06 times more volatile than Northern Bond Index. It trades about 0.14 of its potential returns per unit of risk. Northern Bond Index is currently generating about 0.02 per unit of risk. If you would invest 1,406 in Northern Income Equity on August 25, 2024 and sell it today you would earn a total of 363.00 from holding Northern Income Equity or generate 25.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Income Equity vs. Northern Bond Index
Performance |
| Timeline |
| Northern Income Equity |
| Northern Bond Index |
Northern Income and Northern Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Income and Northern Bond
The main advantage of trading using opposite Northern Income and Northern Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Income 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.| Northern Income vs. Northern High Yield | Northern Income vs. Northern International Equity | Northern Income vs. Northern Large Cap | Northern Income vs. Northern Stock Index |
| Northern Bond vs. Ab All Market | Northern Bond vs. Doubleline Emerging Markets | Northern Bond vs. Western Asset Diversified | Northern Bond vs. Sp Midcap Index |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
Other Complementary Tools
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| CEOs Directory Screen CEOs from public companies around the world | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules |