Correlation Between Northern Small and Ab Municipal
Can any of the company-specific risk be diversified away by investing in both Northern Small and Ab Municipal 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 Municipal 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 Municipal Bond, you can compare the effects of market volatilities on Northern Small and Ab Municipal 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 Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Small and Ab Municipal.
Diversification Opportunities for Northern Small and Ab Municipal
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Northern and AUNTX is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Northern Small Cap and Ab Municipal Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Municipal Bond 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 Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Municipal Bond has no effect on the direction of Northern Small i.e., Northern Small and Ab Municipal go up and down completely randomly.
Pair Corralation between Northern Small and Ab Municipal
Assuming the 90 days horizon Northern Small Cap is expected to under-perform the Ab Municipal. In addition to that, Northern Small is 8.08 times more volatile than Ab Municipal Bond. It trades about -0.31 of its total potential returns per unit of risk. Ab Municipal Bond is currently generating about -0.22 per unit of volatility. If you would invest 1,076 in Ab Municipal Bond on October 11, 2024 and sell it today you would lose (11.00) from holding Ab Municipal Bond or give up 1.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Northern Small Cap vs. Ab Municipal Bond
Performance |
| Timeline |
| Northern Small Cap |
| Ab Municipal Bond |
Northern Small and Ab Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Small and Ab Municipal
The main advantage of trading using opposite Northern Small and Ab Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Small position performs unexpectedly, Ab Municipal 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 Municipal will offset losses from the drop in Ab Municipal's long position.| Northern Small vs. Calamos Growth Fund | Northern Small vs. T Rowe Price | Northern Small vs. L Abbett Growth | Northern Small vs. Qs Growth Fund |
| Ab Municipal vs. Vanguard Financials Index | Ab Municipal vs. Blackstone Secured Lending | Ab Municipal vs. Angel Oak Financial | Ab Municipal vs. Putnam Global Financials |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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