Correlation Between Northern International and Multi-manager Global
Can any of the company-specific risk be diversified away by investing in both Northern International and Multi-manager 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 International and Multi-manager Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern International Equity and Multi Manager Global Real, you can compare the effects of market volatilities on Northern International and Multi-manager 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 International with a short position of Multi-manager Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern International and Multi-manager Global.
Diversification Opportunities for Northern International and Multi-manager Global
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Northern and Multi-manager is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Northern International Equity 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 International 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 International Equity are associated (or correlated) with Multi-manager Global. 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 International i.e., Northern International and Multi-manager Global go up and down completely randomly.
Pair Corralation between Northern International and Multi-manager Global
Assuming the 90 days horizon Northern International Equity is expected to generate 1.38 times more return on investment than Multi-manager Global. However, Northern International is 1.38 times more volatile than Multi Manager Global Real. It trades about 0.1 of its potential returns per unit of risk. Multi Manager Global Real is currently generating about 0.09 per unit of risk. If you would invest 1,040 in Northern International Equity on December 1, 2024 and sell it today you would earn a total of 16.00 from holding Northern International Equity or generate 1.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Northern International Equity vs. Multi Manager Global Real
Performance |
| Timeline |
| Northern International |
| Multi Manager Global |
Northern International and Multi-manager Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern International and Multi-manager Global
The main advantage of trading using opposite Northern International and Multi-manager Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern International position performs unexpectedly, Multi-manager 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 Multi-manager Global will offset losses from the drop in Multi-manager Global's long position.The idea behind Northern International Equity and Multi Manager Global Real pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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