Correlation Between Northern Large and Eaton Vance

Can any of the company-specific risk be diversified away by investing in both Northern Large and Eaton Vance 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 Eaton Vance 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 Eaton Vance Growth, you can compare the effects of market volatilities on Northern Large and Eaton Vance 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 Eaton Vance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Large and Eaton Vance.

Diversification Opportunities for Northern Large and Eaton Vance

0.98

Correlation Coefficient

Northern Large  Eaton Vance

Almost no diversification

The 3 months correlation between Northern and Eaton is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Northern Large Cap and Eaton Vance Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton Vance Growth 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 Eaton Vance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eaton Vance Growth has no effect on the direction of Northern Large i.e., Northern Large and Eaton Vance go up and down completely randomly.

Pair Corralation between Northern Large and Eaton Vance

Assuming the 90 days horizon Northern Large is expected to generate 1.22 times less return on investment than Eaton Vance. But when comparing it to its historical volatility, Northern Large Cap is 1.17 times less risky than Eaton Vance. It trades about 0.71 of its potential returns per unit of risk. Eaton Vance Growth is currently generating about 0.74 of returns per unit of risk over similar time horizon. If you would invest  3,481  in Eaton Vance Growth on February 17, 2025 and sell it today you would earn a total of  696.00  from holding Eaton Vance Growth or generate 19.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Northern Large Cap  vs.  Eaton Vance Growth

Northern Large Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Northern Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Northern Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Eaton Vance Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eaton Vance Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Eaton Vance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Northern Large and Eaton Vance

The main advantage of trading using opposite Northern Large and Eaton Vance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Large position performs unexpectedly, Eaton Vance 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 Eaton Vance will offset losses from the drop in Eaton Vance's long position.

The idea behind Northern Large Cap and Eaton Vance Growth 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.

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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.