Correlation Between International Fund and Northern Mid

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

By analyzing existing cross correlation between International Fund International and Northern Mid Cap, you can compare the effects of market volatilities on International Fund and Northern Mid 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 International Fund with a short position of Northern Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Fund and Northern Mid.

Diversification Opportunities for International Fund and Northern Mid

0.6

Correlation Coefficient

International Fund  Northern Mid

Poor diversification

The 3 months correlation between International and Northern is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding International Fund Internation and Northern Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Mid Cap and International Fund 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 International Fund International are associated (or correlated) with Northern Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Mid Cap has no effect on the direction of International Fund i.e., International Fund and Northern Mid go up and down completely randomly.

Pair Corralation between International Fund and Northern Mid

Assuming the 90 days horizon International Fund International is expected to generate 0.57 times more return on investment than Northern Mid. However, International Fund International is 1.77 times less risky than Northern Mid. It trades about 0.06 of its potential returns per unit of risk. Northern Mid Cap is currently generating about 0.03 per unit of risk. If you would invest  2,995  in International Fund International on October 5, 2024 and sell it today you would earn a total of  632.00  from holding International Fund International or generate 21.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

International Fund Internation  vs.  Northern Mid Cap

International Fund

Risk-Adjusted Performance

0 of 100

Very Weak

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

Northern Mid Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Northern Mid Cap 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.

Pair Trading with International Fund and Northern Mid

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

The idea behind International Fund International and Northern Mid Cap 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.