Correlation Between Northern International and Vanguard Total
Can any of the company-specific risk be diversified away by investing in both Northern International and Vanguard Total 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 Vanguard Total 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 Vanguard Total International, you can compare the effects of market volatilities on Northern International and Vanguard Total 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 Vanguard Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern International and Vanguard Total.
Diversification Opportunities for Northern International and Vanguard Total
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Northern and Vanguard is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Northern International Equity and Vanguard Total International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Inter 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 Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Inter has no effect on the direction of Northern International i.e., Northern International and Vanguard Total go up and down completely randomly.
Pair Corralation between Northern International and Vanguard Total
Assuming the 90 days horizon Northern International Equity is expected to under-perform the Vanguard Total. In addition to that, Northern International is 1.03 times more volatile than Vanguard Total International. It trades about -0.25 of its total potential returns per unit of risk. Vanguard Total International is currently generating about -0.21 per unit of volatility. If you would invest 2,081 in Vanguard Total International on August 29, 2024 and sell it today you would lose (129.00) from holding Vanguard Total International or give up 6.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern International Equity vs. Vanguard Total International
Performance |
| Timeline |
| Northern International |
| Vanguard Total Inter |
Northern International and Vanguard Total Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern International and Vanguard Total
The main advantage of trading using opposite Northern International and Vanguard Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern International position performs unexpectedly, Vanguard Total 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 Vanguard Total will offset losses from the drop in Vanguard Total's long position.The idea behind Northern International Equity and Vanguard Total International 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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