Correlation Between Ab Value and Northern Short-intermedia

Can any of the company-specific risk be diversified away by investing in both Ab Value and Northern Short-intermedia 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 Ab Value and Northern Short-intermedia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ab Value Fund and Northern Short Intermediate Tax Exempt, you can compare the effects of market volatilities on Ab Value and Northern Short-intermedia 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 Ab Value with a short position of Northern Short-intermedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Value and Northern Short-intermedia.

Diversification Opportunities for Ab Value and Northern Short-intermedia

0.2

Correlation Coefficient

Ab Value  Northern Short-intermedia

Modest diversification

The 3 months correlation between ABVCX and Northern is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Ab Value Fund and Northern Short Intermediate Ta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Short-intermedia and Ab Value 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 Ab Value Fund are associated (or correlated) with Northern Short-intermedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Short-intermedia has no effect on the direction of Ab Value i.e., Ab Value and Northern Short-intermedia go up and down completely randomly.

Pair Corralation between Ab Value and Northern Short-intermedia

Assuming the 90 days horizon Ab Value Fund is expected to generate 8.04 times more return on investment than Northern Short-intermedia. However, Ab Value is 8.04 times more volatile than Northern Short Intermediate Tax Exempt. It trades about 0.03 of its potential returns per unit of risk. Northern Short Intermediate Tax Exempt is currently generating about 0.07 per unit of risk. If you would invest  1,565  in Ab Value Fund on October 12, 2024 and sell it today you would earn a total of  180.00  from holding Ab Value Fund or generate 11.5% return on investment over 90 days.

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

Ab Value Fund  vs.  Northern Short Intermediate Ta

Ab Value Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ab Value Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Northern Short-intermedia

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Ab Value and Northern Short-intermedia

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

The idea behind Ab Value Fund and Northern Short Intermediate Tax Exempt 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.