Correlation Between Northern Large and Northern International
Can any of the company-specific risk be diversified away by investing in both Northern Large and Northern International 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 Northern International 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 Northern International Equity, you can compare the effects of market volatilities on Northern Large and Northern International 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 Northern International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Large and Northern International.
Diversification Opportunities for Northern Large and Northern International
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Northern and Northern is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Northern Large Cap and Northern International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern International 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 Northern International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern International has no effect on the direction of Northern Large i.e., Northern Large and Northern International go up and down completely randomly.
Pair Corralation between Northern Large and Northern International
Assuming the 90 days horizon Northern Large Cap is expected to generate 1.13 times more return on investment than Northern International. However, Northern Large is 1.13 times more volatile than Northern International Equity. It trades about 0.21 of its potential returns per unit of risk. Northern International Equity is currently generating about -0.21 per unit of risk. If you would invest 2,242 in Northern Large Cap on August 28, 2024 and sell it today you would earn a total of 95.00 from holding Northern Large Cap or generate 4.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Large Cap vs. Northern International Equity
Performance |
| Timeline |
| Northern Large Cap |
| Northern International |
Northern Large and Northern International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Large and Northern International
The main advantage of trading using opposite Northern Large and Northern International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Large position performs unexpectedly, Northern International 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 International will offset losses from the drop in Northern International's long position.| Northern Large vs. Pace Large Growth | Northern Large vs. Legg Mason Bw | Northern Large vs. Enhanced Large Pany | Northern Large vs. Tax Managed Large Cap |
| Northern International vs. Northern Bond Index | Northern International vs. Northern E Bond | Northern International vs. Northern Arizona Tax Exempt | Northern International 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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