Correlation Between Northern Large and Pear Tree
Can any of the company-specific risk be diversified away by investing in both Northern Large and Pear Tree 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 Pear Tree 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 Pear Tree Polaris, you can compare the effects of market volatilities on Northern Large and Pear Tree 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 Pear Tree. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Large and Pear Tree.
Diversification Opportunities for Northern Large and Pear Tree
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Northern and Pear is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Northern Large Cap and Pear Tree Polaris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pear Tree Polaris 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 Pear Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pear Tree Polaris has no effect on the direction of Northern Large i.e., Northern Large and Pear Tree go up and down completely randomly.
Pair Corralation between Northern Large and Pear Tree
Assuming the 90 days horizon Northern Large Cap is expected to generate 1.2 times more return on investment than Pear Tree. However, Northern Large is 1.2 times more volatile than Pear Tree Polaris. It trades about 0.21 of its potential returns per unit of risk. Pear Tree Polaris is currently generating about -0.16 per unit of risk. If you would invest 2,242 in Northern Large Cap on August 29, 2024 and sell it today you would earn a total of 97.00 from holding Northern Large Cap or generate 4.33% 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. Pear Tree Polaris
Performance |
| Timeline |
| Northern Large Cap |
| Pear Tree Polaris |
Northern Large and Pear Tree Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Large and Pear Tree
The main advantage of trading using opposite Northern Large and Pear Tree positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Large position performs unexpectedly, Pear Tree 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 Pear Tree will offset losses from the drop in Pear Tree's long position.| Northern Large vs. Goldman Sachs Technology | Northern Large vs. Science Technology Fund | Northern Large vs. Firsthand Technology Opportunities | Northern Large vs. Global Technology Portfolio |
| Pear Tree vs. HUMANA INC | Pear Tree vs. Aquagold International | Pear Tree vs. Barloworld Ltd ADR | Pear Tree vs. Morningstar Unconstrained Allocation |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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