Correlation Between Northern Small and Bats Series
Can any of the company-specific risk be diversified away by investing in both Northern Small and Bats Series 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 Bats Series 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 Bats Series M, you can compare the effects of market volatilities on Northern Small and Bats Series 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 Bats Series. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Small and Bats Series.
Diversification Opportunities for Northern Small and Bats Series
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between NORTHERN and Bats is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Northern Small Cap and Bats Series M in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bats Series M 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 Bats Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bats Series M has no effect on the direction of Northern Small i.e., Northern Small and Bats Series go up and down completely randomly.
Pair Corralation between Northern Small and Bats Series
Assuming the 90 days horizon Northern Small Cap is expected to generate 4.69 times more return on investment than Bats Series. However, Northern Small is 4.69 times more volatile than Bats Series M. It trades about 0.24 of its potential returns per unit of risk. Bats Series M is currently generating about 0.11 per unit of risk. If you would invest 1,475 in Northern Small Cap on September 5, 2024 and sell it today you would earn a total of 133.00 from holding Northern Small Cap or generate 9.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Small Cap vs. Bats Series M
Performance |
| Timeline |
| Northern Small Cap |
| Bats Series M |
Northern Small and Bats Series Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Small and Bats Series
The main advantage of trading using opposite Northern Small and Bats Series positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Small position performs unexpectedly, Bats Series 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 Bats Series will offset losses from the drop in Bats Series' long position.| Northern Small vs. Artisan High Income | Northern Small vs. Limited Term Tax | Northern Small vs. Sei Daily Income | Northern Small vs. Multisector Bond Sma |
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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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