Correlation Between Northern Intermediate and Northern Fixed
Can any of the company-specific risk be diversified away by investing in both Northern Intermediate 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 Intermediate 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 Intermediate Tax Exempt and Northern Fixed Income, you can compare the effects of market volatilities on Northern Intermediate 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 Intermediate with a short position of Northern Fixed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Intermediate and Northern Fixed.
Diversification Opportunities for Northern Intermediate and Northern Fixed
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Northern and Northern is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Northern Intermediate Tax Exem 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 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 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 Intermediate i.e., Northern Intermediate and Northern Fixed go up and down completely randomly.
Pair Corralation between Northern Intermediate and Northern Fixed
Assuming the 90 days horizon Northern Intermediate Tax Exempt is expected to generate 0.47 times more return on investment than Northern Fixed. However, Northern Intermediate Tax Exempt is 2.12 times less risky than Northern Fixed. It trades about 0.05 of its potential returns per unit of risk. Northern Fixed Income 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 | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Intermediate Tax Exem vs. Northern Fixed Income
Performance |
| Timeline |
| Northern Intermediate |
| Northern Fixed Income |
Northern Intermediate and Northern Fixed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Intermediate and Northern Fixed
The main advantage of trading using opposite Northern Intermediate and Northern Fixed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Intermediate 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 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 Fixed vs. Northern Bond Index | Northern Fixed vs. Northern E Bond | Northern Fixed vs. Northern Arizona Tax Exempt | Northern Fixed vs. Northern Emerging Markets |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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