Correlation Between Northern Intermediate and Northern Fixed

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

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

Diversification Opportunities for Northern Intermediate and Northern Fixed

0.77

Correlation Coefficient

Northern Intermediate  Northern Fixed

Poor diversification

The 3 months correlation between Northern and Northern is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Northern Intermediate Tax Exem and Northern Fixed Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Fixed Income and Northern Intermediate 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 Intermediate Tax Exempt are associated (or correlated) with Northern Fixed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Fixed Income has no effect on the direction of Northern Intermediate i.e., Northern Intermediate and Northern Fixed go up and down completely randomly.

Pair Corralation between Northern Intermediate and Northern Fixed

Assuming the 90 days horizon Northern Intermediate is expected to generate 1.24 times less return on investment than Northern Fixed. But when comparing it to its historical volatility, Northern Intermediate Tax Exempt is 2.13 times less risky than Northern Fixed. It trades about 0.06 of its potential returns per unit of risk. Northern Fixed Income is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  822.00  in Northern Fixed Income on September 23, 2024 and sell it today you would earn a total of  57.00  from holding Northern Fixed Income or generate 6.93% return on investment over 90 days.

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

Northern Intermediate Tax Exem  vs.  Northern Fixed Income

Northern Intermediate

Risk-Adjusted Performance

0 of 100

Very Weak

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

Northern Fixed Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Northern Fixed Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Northern Fixed 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 Intermediate and Northern Fixed

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

The idea behind Northern Intermediate Tax Exempt and Northern Fixed Income 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.