Correlation Between Northern Small and Ab Small
Can any of the company-specific risk be diversified away by investing in both Northern Small and Ab Small 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 Small and Ab Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Small Cap and Ab Small Cap, you can compare the effects of market volatilities on Northern Small and Ab Small 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 Small with a short position of Ab Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Small and Ab Small.
Diversification Opportunities for Northern Small and Ab Small
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Northern and SCYVX is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Northern Small Cap and Ab Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Small Cap and Northern Small 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 Small Cap are associated (or correlated) with Ab Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Small Cap has no effect on the direction of Northern Small i.e., Northern Small and Ab Small go up and down completely randomly.
Pair Corralation between Northern Small and Ab Small
Assuming the 90 days horizon Northern Small Cap is expected to under-perform the Ab Small. In addition to that, Northern Small is 1.01 times more volatile than Ab Small Cap. It trades about -0.1 of its total potential returns per unit of risk. Ab Small Cap is currently generating about 0.11 per unit of volatility. If you would invest 1,612 in Ab Small Cap on September 13, 2024 and sell it today you would earn a total of 27.00 from holding Ab Small Cap or generate 1.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Northern Small Cap vs. Ab Small Cap
Performance |
| Timeline |
| Northern Small Cap |
| Ab Small Cap |
Northern Small and Ab Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Small and Ab Small
The main advantage of trading using opposite Northern Small and Ab Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Small position performs unexpectedly, Ab Small 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 Ab Small will offset losses from the drop in Ab Small's long position.| Northern Small vs. American Beacon Large | Northern Small vs. Harbor International Fund | Northern Small vs. Credit Suisse Modity | Northern Small vs. Metropolitan West Total |
| Ab Small vs. Small Cap Core | Ab Small vs. Aquagold International | Ab Small vs. Morningstar Unconstrained Allocation | Ab Small vs. Thrivent High Yield |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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