Correlation Between Northern Large and Federated Strategic
Can any of the company-specific risk be diversified away by investing in both Northern Large and Federated Strategic 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 Federated Strategic 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 Federated Strategic Value, you can compare the effects of market volatilities on Northern Large and Federated Strategic 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 Federated Strategic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Large and Federated Strategic.
Diversification Opportunities for Northern Large and Federated Strategic
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Northern and Federated is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Northern Large Cap and Federated Strategic Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Strategic Value 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 Federated Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Strategic Value has no effect on the direction of Northern Large i.e., Northern Large and Federated Strategic go up and down completely randomly.
Pair Corralation between Northern Large and Federated Strategic
Assuming the 90 days horizon Northern Large Cap is expected to generate 1.03 times more return on investment than Federated Strategic. However, Northern Large is 1.03 times more volatile than Federated Strategic Value. It trades about 0.05 of its potential returns per unit of risk. Federated Strategic Value is currently generating about -0.02 per unit of risk. If you would invest 1,828 in Northern Large Cap on January 17, 2024 and sell it today you would earn a total of 207.00 from holding Northern Large Cap or generate 11.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Large Cap vs. Federated Strategic Value
Performance |
| Timeline |
| Northern Large Cap |
| Federated Strategic Value |
Northern Large and Federated Strategic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Large and Federated Strategic
The main advantage of trading using opposite Northern Large and Federated Strategic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Large position performs unexpectedly, Federated Strategic 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 Federated Strategic will offset losses from the drop in Federated Strategic's long position.| Northern Large vs. Northern Bond Index | Northern Large vs. Northern E Bond | Northern Large vs. Northern Arizona Tax Exempt | Northern Large vs. Northern Emerging Markets |
| Federated Strategic vs. Federated Mdt All | Federated Strategic vs. Federated Global Allocation | Federated Strategic vs. Federated Strategic Income | Federated Strategic vs. Federated Global Allocation |
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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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