Correlation Between Northern Bond and Multi Manager

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

By analyzing existing cross correlation between Northern Bond Index and Multi Manager High Yield, you can compare the effects of market volatilities on Northern Bond and Multi Manager 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 Bond with a short position of Multi Manager. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Bond and Multi Manager.

Diversification Opportunities for Northern Bond and Multi Manager

-0.27

Correlation Coefficient

Northern Bond  Multi Manager

Very good diversification

The 3 months correlation between Northern and Multi is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Northern Bond Index and Multi Manager High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Manager High and Northern Bond 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 Bond Index are associated (or correlated) with Multi Manager. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multi Manager High has no effect on the direction of Northern Bond i.e., Northern Bond and Multi Manager go up and down completely randomly.

Pair Corralation between Northern Bond and Multi Manager

Assuming the 90 days horizon Northern Bond Index is expected to under-perform the Multi Manager. In addition to that, Northern Bond is 2.45 times more volatile than Multi Manager High Yield. It trades about -0.12 of its total potential returns per unit of risk. Multi Manager High Yield is currently generating about 0.21 per unit of volatility. If you would invest  840.00  in Multi Manager High Yield on September 13, 2024 and sell it today you would earn a total of  14.00  from holding Multi Manager High Yield or generate 1.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Northern Bond Index  vs.  Multi Manager High Yield

Northern Bond Index

Risk-Adjusted Performance

0 of 100

Very Weak

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

Multi Manager High

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Multi Manager High Yield are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Multi Manager is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Northern Bond and Multi Manager

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

The idea behind Northern Bond Index and Multi Manager High Yield 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.