Correlation Between Ab Select and Northern Short

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

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

Diversification Opportunities for Ab Select and Northern Short

0.39

Correlation Coefficient

Ab Select  Northern Short

Weak diversification

The 3 months correlation between AUUIX and Northern is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Ab Select Equity and Northern Short Intermediate Ta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Short Inter and Ab Select 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 Select Equity are associated (or correlated) with Northern Short. 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 Inter has no effect on the direction of Ab Select i.e., Ab Select and Northern Short go up and down completely randomly.

Pair Corralation between Ab Select and Northern Short

Assuming the 90 days horizon Ab Select Equity is expected to under-perform the Northern Short. In addition to that, Ab Select is 11.53 times more volatile than Northern Short Intermediate Tax Exempt. It trades about -0.09 of its total potential returns per unit of risk. Northern Short Intermediate Tax Exempt is currently generating about 0.08 per unit of volatility. If you would invest  994.00  in Northern Short Intermediate Tax Exempt on December 2, 2024 and sell it today you would earn a total of  5.00  from holding Northern Short Intermediate Tax Exempt or generate 0.5% return on investment over 90 days.

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

Ab Select Equity  vs.  Northern Short Intermediate Ta

Ab Select Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ab Select Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward 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 Inter

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Short Intermediate Tax Exempt are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Northern Short 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 Select and Northern Short

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

The idea behind Ab Select Equity 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.