Correlation Between Value Line and Northeast Investors
Can any of the company-specific risk be diversified away by investing in both Value Line 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 Value Line and Northeast Investors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Value Line Income and Northeast Investors Trust, you can compare the effects of market volatilities on Value Line 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 Value Line with a short position of Northeast Investors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Value Line and Northeast Investors.
Diversification Opportunities for Value Line and Northeast Investors
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Value and Northeast is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Value Line Income 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 Value Line 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 Value Line Income 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 Value Line i.e., Value Line and Northeast Investors go up and down completely randomly.
Pair Corralation between Value Line and Northeast Investors
Assuming the 90 days horizon Value Line Income is expected to generate 2.8 times more return on investment than Northeast Investors. However, Value Line is 2.8 times more volatile than Northeast Investors Trust. It trades about 0.1 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 884.00 in Value Line Income on November 2, 2024 and sell it today you would earn a total of 428.00 from holding Value Line Income or generate 48.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Value Line Income vs. Northeast Investors Trust
Performance |
| Timeline |
| Value Line Income |
| Northeast Investors Trust |
Value Line and Northeast Investors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Value Line and Northeast Investors
The main advantage of trading using opposite Value Line and Northeast Investors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Value Line 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.| Value Line vs. Value Line Asset | Value Line vs. Value Line Premier | Value Line vs. Value Line Mid | Value Line vs. Value Line Larger |
| Northeast Investors vs. Simt Multi Asset Inflation | Northeast Investors vs. Aqr Managed Futures | Northeast Investors vs. Ab Bond Inflation | Northeast Investors vs. Cref Inflation Linked Bond |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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