Correlation Between Northern Small and Lgm Risk
Can any of the company-specific risk be diversified away by investing in both Northern Small and Lgm Risk 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 Lgm Risk 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 Lgm Risk Managed, you can compare the effects of market volatilities on Northern Small and Lgm Risk 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 Lgm Risk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Small and Lgm Risk.
Diversification Opportunities for Northern Small and Lgm Risk
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Northern and Lgm is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Northern Small Cap and Lgm Risk Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lgm Risk Managed 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 Lgm Risk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lgm Risk Managed has no effect on the direction of Northern Small i.e., Northern Small and Lgm Risk go up and down completely randomly.
Pair Corralation between Northern Small and Lgm Risk
Assuming the 90 days horizon Northern Small Cap is expected to generate 4.27 times more return on investment than Lgm Risk. However, Northern Small is 4.27 times more volatile than Lgm Risk Managed. It trades about 0.06 of its potential returns per unit of risk. Lgm Risk Managed is currently generating about 0.14 per unit of risk. If you would invest 1,135 in Northern Small Cap on September 12, 2024 and sell it today you would earn a total of 451.00 from holding Northern Small Cap or generate 39.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Small Cap vs. Lgm Risk Managed
Performance |
| Timeline |
| Northern Small Cap |
| Lgm Risk Managed |
Northern Small and Lgm Risk Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Small and Lgm Risk
The main advantage of trading using opposite Northern Small and Lgm Risk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Small position performs unexpectedly, Lgm Risk 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 Lgm Risk will offset losses from the drop in Lgm Risk's long position.| Northern Small vs. Aam Select Income | Northern Small vs. Rbc Microcap Value | Northern Small vs. Rbb Fund | Northern Small vs. Acm Dynamic Opportunity |
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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