Correlation Between Sp 500 and Northeast Investors
Can any of the company-specific risk be diversified away by investing in both Sp 500 and Northeast Investors 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 Sp 500 and Northeast Investors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sp 500 Index and Northeast Investors Trust, you can compare the effects of market volatilities on Sp 500 and Northeast Investors 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 Sp 500 with a short position of Northeast Investors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sp 500 and Northeast Investors.
Diversification Opportunities for Sp 500 and Northeast Investors
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between USPRX and Northeast is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Sp 500 Index and Northeast Investors Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northeast Investors Trust and Sp 500 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 Sp 500 Index are associated (or correlated) with Northeast Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northeast Investors Trust has no effect on the direction of Sp 500 i.e., Sp 500 and Northeast Investors go up and down completely randomly.
Pair Corralation between Sp 500 and Northeast Investors
Assuming the 90 days horizon Sp 500 Index is expected to generate 1.92 times more return on investment than Northeast Investors. However, Sp 500 is 1.92 times more volatile than Northeast Investors Trust. It trades about 0.17 of its potential returns per unit of risk. Northeast Investors Trust is currently generating about -0.11 per unit of risk. If you would invest 7,433 in Sp 500 Index on August 30, 2024 and sell it today you would earn a total of 247.00 from holding Sp 500 Index or generate 3.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sp 500 Index vs. Northeast Investors Trust
Performance |
| Timeline |
| Sp 500 Index |
| Northeast Investors Trust |
Sp 500 and Northeast Investors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sp 500 and Northeast Investors
The main advantage of trading using opposite Sp 500 and Northeast Investors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sp 500 position performs unexpectedly, Northeast Investors 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 Northeast Investors will offset losses from the drop in Northeast Investors' long position.| Sp 500 vs. Small Cap Stock | Sp 500 vs. Extended Market Index | Sp 500 vs. Value Fund Value | Sp 500 vs. Income Stock Fund |
| Northeast Investors vs. Angel Oak Ultrashort | Northeast Investors vs. Multisector Bond Sma | Northeast Investors vs. Bbh Intermediate Municipal | Northeast Investors vs. Mirova Global Green |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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