Correlation Between Northern Intermediate and Northern Bond
Can any of the company-specific risk be diversified away by investing in both Northern Intermediate 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 Intermediate 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 Intermediate Tax Exempt and Northern Bond Index, you can compare the effects of market volatilities on Northern Intermediate 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 Intermediate with a short position of Northern Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Intermediate and Northern Bond.
Diversification Opportunities for Northern Intermediate and Northern Bond
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Northern and Northern is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Northern Intermediate Tax Exem 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 Intermediate 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 Intermediate Tax Exempt 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 Intermediate i.e., Northern Intermediate and Northern Bond go up and down completely randomly.
Pair Corralation between Northern Intermediate and Northern Bond
Assuming the 90 days horizon Northern Intermediate Tax Exempt is expected to generate 0.45 times more return on investment than Northern Bond. However, Northern Intermediate Tax Exempt is 2.24 times less risky than Northern Bond. It trades about 0.05 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 963.00 in Northern Intermediate Tax Exempt on August 25, 2024 and sell it today you would earn a total of 18.00 from holding Northern Intermediate Tax Exempt or generate 1.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Intermediate Tax Exem vs. Northern Bond Index
Performance |
| Timeline |
| Northern Intermediate |
| Northern Bond Index |
Northern Intermediate and Northern Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Intermediate and Northern Bond
The main advantage of trading using opposite Northern Intermediate and Northern Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Intermediate 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 Intermediate vs. Northern Tax Exempt Fund | Northern Intermediate vs. Northern High Yield | Northern Intermediate vs. Northern International Equity | Northern Intermediate vs. Northern Mid Cap |
| 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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