Correlation Between Northern International and Northern Income
Can any of the company-specific risk be diversified away by investing in both Northern International and Northern Income 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 Income 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 Income Equity, you can compare the effects of market volatilities on Northern International and Northern Income 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 Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern International and Northern Income.
Diversification Opportunities for Northern International and Northern Income
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NORTHERN and Northern is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Northern International Equity and Northern Income Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Income Equity 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 Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Income Equity has no effect on the direction of Northern International i.e., Northern International and Northern Income go up and down completely randomly.
Pair Corralation between Northern International and Northern Income
Assuming the 90 days horizon Northern International Equity is expected to under-perform the Northern Income. In addition to that, Northern International is 1.0 times more volatile than Northern Income Equity. It trades about -0.21 of its total potential returns per unit of risk. Northern Income Equity is currently generating about 0.13 per unit of volatility. If you would invest 1,726 in Northern Income Equity on August 29, 2024 and sell it today you would earn a total of 62.00 from holding Northern Income Equity or generate 3.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern International Equity vs. Northern Income Equity
Performance |
| Timeline |
| Northern International |
| Northern Income Equity |
Northern International and Northern Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern International and Northern Income
The main advantage of trading using opposite Northern International and Northern Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern International position performs unexpectedly, Northern Income 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 Income will offset losses from the drop in Northern Income'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 Income vs. Northern High Yield | Northern Income vs. Northern International Equity | Northern Income vs. Northern Large Cap | Northern Income vs. Northern Stock 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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