Correlation Between Northern Stock and Northern High
Can any of the company-specific risk be diversified away by investing in both Northern Stock and Northern High 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 Stock and Northern High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Stock Index and Northern High Yield, you can compare the effects of market volatilities on Northern Stock and Northern High 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 Stock with a short position of Northern High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Stock and Northern High.
Diversification Opportunities for Northern Stock and Northern High
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Northern and Northern is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Northern Stock Index and Northern High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern High Yield and Northern Stock 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 Stock Index are associated (or correlated) with Northern High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern High Yield has no effect on the direction of Northern Stock i.e., Northern Stock and Northern High go up and down completely randomly.
Pair Corralation between Northern Stock and Northern High
Assuming the 90 days horizon Northern Stock Index is expected to under-perform the Northern High. In addition to that, Northern Stock is 3.85 times more volatile than Northern High Yield. It trades about -0.23 of its total potential returns per unit of risk. Northern High Yield is currently generating about 0.06 per unit of volatility. If you would invest 605.00 in Northern High Yield on December 6, 2024 and sell it today you would earn a total of 2.00 from holding Northern High Yield or generate 0.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Stock Index vs. Northern High Yield
Performance |
| Timeline |
| Northern Stock Index |
| Northern High Yield |
Northern Stock and Northern High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Stock and Northern High
The main advantage of trading using opposite Northern Stock and Northern High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Stock position performs unexpectedly, Northern High 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 High will offset losses from the drop in Northern High's long position.| Northern Stock vs. Northern Small Cap | Northern Stock vs. Northern International Equity | Northern Stock vs. Northern Mid Cap | Northern Stock vs. Northern Bond Index |
| Northern High vs. Northern Emerging Markets | Northern High vs. Northern Global Real | Northern High vs. Northern International Equity | Northern High vs. Northern Small Cap |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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