Correlation Between Northern Large and Dodge Stock

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Can any of the company-specific risk be diversified away by investing in both Northern Large and Dodge Stock 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 Large and Dodge Stock into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Large Cap and Dodge Stock Fund, you can compare the effects of market volatilities on Northern Large and Dodge Stock 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 Large with a short position of Dodge Stock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Large and Dodge Stock.

Diversification Opportunities for Northern Large and Dodge Stock

0.95
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Northern and Dodge is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding NORTHERN LARGE CAP and DODGE STOCK FUND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dodge Stock Fund and Northern Large 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 Large Cap are associated (or correlated) with Dodge Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dodge Stock Fund has no effect on the direction of Northern Large i.e., Northern Large and Dodge Stock go up and down completely randomly.

Pair Corralation between Northern Large and Dodge Stock

Assuming the 90 days horizon Northern Large is expected to generate 1.07 times less return on investment than Dodge Stock. But when comparing it to its historical volatility, Northern Large Cap is 1.94 times less risky than Dodge Stock. It trades about 0.48 of its potential returns per unit of risk. Dodge Stock Fund is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  24,421  in Dodge Stock Fund on December 29, 2023 and sell it today you would earn a total of  1,322  from holding Dodge Stock Fund or generate 5.41% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy95.65%
ValuesDaily Returns

NORTHERN LARGE CAP  vs.  DODGE STOCK FUND

 Performance 
       Timeline  
Northern Large Cap 

Risk-Adjusted Performance

20 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Northern Large Cap are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly fragile basic indicators, Northern Large may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Dodge Stock Fund 

Risk-Adjusted Performance

14 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Dodge Stock Fund are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Dodge Stock may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Northern Large and Dodge Stock Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Northern Large and Dodge Stock

The main advantage of trading using opposite Northern Large and Dodge Stock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Large position performs unexpectedly, Dodge Stock 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 Dodge Stock will offset losses from the drop in Dodge Stock's long position.
The idea behind Northern Large Cap and Dodge Stock Fund 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.
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.

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