Correlation Between Snap and Northern Bond
Can any of the company-specific risk be diversified away by investing in both Snap and Northern Bond 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 Snap and Northern Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and Northern Bond Index, you can compare the effects of market volatilities on Snap and Northern Bond 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 Snap with a short position of Northern Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and Northern Bond.
Diversification Opportunities for Snap and Northern Bond
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Snap and Northern is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and Northern Bond Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Bond Index and Snap 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 Snap Inc are associated (or correlated) with Northern Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Bond Index has no effect on the direction of Snap i.e., Snap and Northern Bond go up and down completely randomly.
Pair Corralation between Snap and Northern Bond
Given the investment horizon of 90 days Snap Inc is expected to generate 11.83 times more return on investment than Northern Bond. However, Snap is 11.83 times more volatile than Northern Bond Index. It trades about 0.06 of its potential returns per unit of risk. Northern Bond Index is currently generating about -0.26 per unit of risk. If you would invest 1,057 in Snap Inc on August 25, 2024 and sell it today you would earn a total of 85.00 from holding Snap Inc or generate 8.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Snap Inc vs. Northern Bond Index
Performance |
| Timeline |
| Snap Inc |
| Northern Bond Index |
Snap and Northern Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and Northern Bond
The main advantage of trading using opposite Snap and Northern Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap position performs unexpectedly, Northern Bond 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 Bond will offset losses from the drop in Northern Bond's long position.The idea behind Snap Inc and Northern Bond Index pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Northern Bond vs. Ab All Market | Northern Bond vs. Doubleline Emerging Markets | Northern Bond vs. Western Asset Diversified | Northern Bond vs. Sp Midcap Index |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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