Correlation Between Northern Small and Midcap Growth
Can any of the company-specific risk be diversified away by investing in both Northern Small and Midcap Growth 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 Midcap Growth 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 Midcap Growth Fund, you can compare the effects of market volatilities on Northern Small and Midcap Growth 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 Midcap Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Small and Midcap Growth.
Diversification Opportunities for Northern Small and Midcap Growth
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NORTHERN and Midcap is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Northern Small Cap and Midcap Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midcap Growth 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 Midcap Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Midcap Growth has no effect on the direction of Northern Small i.e., Northern Small and Midcap Growth go up and down completely randomly.
Pair Corralation between Northern Small and Midcap Growth
Assuming the 90 days horizon Northern Small is expected to generate 2.04 times less return on investment than Midcap Growth. In addition to that, Northern Small is 1.37 times more volatile than Midcap Growth Fund. It trades about 0.24 of its total potential returns per unit of risk. Midcap Growth Fund is currently generating about 0.67 per unit of volatility. If you would invest 1,046 in Midcap Growth Fund on September 5, 2024 and sell it today you would earn a total of 156.00 from holding Midcap Growth Fund or generate 14.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 77.27% |
| Values | Daily Returns |
Northern Small Cap vs. Midcap Growth Fund
Performance |
| Timeline |
| Northern Small Cap |
| Midcap Growth |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Strong
Northern Small and Midcap Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Small and Midcap Growth
The main advantage of trading using opposite Northern Small and Midcap Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Small position performs unexpectedly, Midcap Growth 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 Midcap Growth will offset losses from the drop in Midcap Growth's 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 |
| Midcap Growth vs. Strategic Asset Management | Midcap Growth vs. Strategic Asset Management | Midcap Growth vs. Strategic Asset Management | Midcap Growth vs. Strategic Asset Management |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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