Correlation Between Northern International and Northern Fixed
Can any of the company-specific risk be diversified away by investing in both Northern International 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 International 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 International Equity and Northern Fixed Income, you can compare the effects of market volatilities on Northern International 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 International with a short position of Northern Fixed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern International and Northern Fixed.
Diversification Opportunities for Northern International and Northern Fixed
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NORTHERN and Northern is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Northern International Equity 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 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 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 International i.e., Northern International and Northern Fixed go up and down completely randomly.
Pair Corralation between Northern International and Northern Fixed
Assuming the 90 days horizon Northern International Equity is expected to under-perform the Northern Fixed. In addition to that, Northern International is 2.14 times more volatile than Northern Fixed Income. It trades about -0.14 of its total potential returns per unit of risk. Northern Fixed Income is currently generating about 0.03 per unit of volatility. If you would invest 890.00 in Northern Fixed Income on August 29, 2024 and sell it today you would earn a total of 2.00 from holding Northern Fixed Income or generate 0.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern International Equity vs. Northern Fixed Income
Performance |
| Timeline |
| Northern International |
| Northern Fixed Income |
Northern International and Northern Fixed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern International and Northern Fixed
The main advantage of trading using opposite Northern International and Northern Fixed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern International 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 International vs. Versatile Bond Portfolio | Northern International vs. Barings Active Short | Northern International vs. Angel Oak Ultrashort | Northern International vs. Sterling Capital Short |
| Northern Fixed vs. Volumetric Fund Volumetric | Northern Fixed vs. Growth Fund Of | Northern Fixed vs. Versatile Bond Portfolio | Northern Fixed vs. Small Cap Stock |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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