Correlation Between Northern Large and Payden Emerging
Can any of the company-specific risk be diversified away by investing in both Northern Large and Payden Emerging 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 Large and Payden Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Large Cap and Payden Emerging Markets, you can compare the effects of market volatilities on Northern Large and Payden Emerging 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 Large with a short position of Payden Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Large and Payden Emerging.
Diversification Opportunities for Northern Large and Payden Emerging
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Northern and Payden is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Northern Large Cap and Payden Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden Emerging Markets and Northern Large 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 Large Cap are associated (or correlated) with Payden Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payden Emerging Markets has no effect on the direction of Northern Large i.e., Northern Large and Payden Emerging go up and down completely randomly.
Pair Corralation between Northern Large and Payden Emerging
Assuming the 90 days horizon Northern Large Cap is expected to generate 2.19 times more return on investment than Payden Emerging. However, Northern Large is 2.19 times more volatile than Payden Emerging Markets. It trades about 0.14 of its potential returns per unit of risk. Payden Emerging Markets is currently generating about 0.13 per unit of risk. If you would invest 2,043 in Northern Large Cap on August 26, 2024 and sell it today you would earn a total of 1,074 from holding Northern Large Cap or generate 52.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Large Cap vs. Payden Emerging Markets
Performance |
| Timeline |
| Northern Large Cap |
| Payden Emerging Markets |
Northern Large and Payden Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Large and Payden Emerging
The main advantage of trading using opposite Northern Large and Payden Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Large position performs unexpectedly, Payden Emerging 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 Payden Emerging will offset losses from the drop in Payden Emerging's long position.| Northern Large vs. Northern Stock Index | Northern Large vs. Northern Mid Cap | Northern Large vs. Northern Income Equity | Northern Large vs. Northern International Equity |
| Payden Emerging vs. Barings Global Floating | Payden Emerging vs. Morgan Stanley Global | Payden Emerging vs. T Rowe Price | Payden Emerging vs. Artisan Global Unconstrained |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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