Correlation Between Northern High and Northern California
Can any of the company-specific risk be diversified away by investing in both Northern High and Northern California 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 High and Northern California into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern High Yield and Northern California Intermediate, you can compare the effects of market volatilities on Northern High and Northern California 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 High with a short position of Northern California. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern High and Northern California.
Diversification Opportunities for Northern High and Northern California
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Northern and Northern is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Northern High Yield and Northern California Intermedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern California and Northern High 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 High Yield are associated (or correlated) with Northern California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern California has no effect on the direction of Northern High i.e., Northern High and Northern California go up and down completely randomly.
Pair Corralation between Northern High and Northern California
Assuming the 90 days horizon Northern High Yield is expected to generate 0.76 times more return on investment than Northern California. However, Northern High Yield is 1.31 times less risky than Northern California. It trades about -0.32 of its potential returns per unit of risk. Northern California Intermediate is currently generating about -0.28 per unit of risk. If you would invest 611.00 in Northern High Yield on September 24, 2024 and sell it today you would lose (7.00) from holding Northern High Yield or give up 1.15% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Northern High Yield vs. Northern California Intermedia
Performance |
Timeline |
Northern High Yield |
Northern California |
Northern High and Northern California Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Northern High and Northern California
The main advantage of trading using opposite Northern High and Northern California positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern High position performs unexpectedly, Northern California 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 California will offset losses from the drop in Northern California's long position.Northern High vs. Northern Emerging Markets | Northern High vs. Northern Global Real | Northern High vs. Northern International Equity | Northern High vs. Northern Small Cap |
Northern California vs. Northern Bond Index | Northern California vs. Northern E Bond | Northern California vs. Northern Arizona Tax Exempt | Northern California vs. Northern Emerging Markets |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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