Correlation Between Mesirow Financial and Northern Small

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

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

Diversification Opportunities for Mesirow Financial and Northern Small

0.95

Correlation Coefficient

Mesirow Financial  Northern Small

Almost no diversification

The 3 months correlation between Mesirow and Northern is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Mesirow Financial Small and Northern Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Small Cap and Mesirow Financial 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 Mesirow Financial Small are associated (or correlated) with Northern Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Small Cap has no effect on the direction of Mesirow Financial i.e., Mesirow Financial and Northern Small go up and down completely randomly.

Pair Corralation between Mesirow Financial and Northern Small

Assuming the 90 days horizon Mesirow Financial Small is expected to generate 0.88 times more return on investment than Northern Small. However, Mesirow Financial Small is 1.14 times less risky than Northern Small. It trades about 0.03 of its potential returns per unit of risk. Northern Small Cap is currently generating about 0.02 per unit of risk. If you would invest  1,099  in Mesirow Financial Small on October 5, 2024 and sell it today you would earn a total of  146.00  from holding Mesirow Financial Small or generate 13.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.78%
Values	Daily Returns

Mesirow Financial Small  vs.  Northern Small Cap

Mesirow Financial Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mesirow Financial Small 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 Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Northern Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Mesirow Financial and Northern Small

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

The idea behind Mesirow Financial Small and Northern Small 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.

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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.