Correlation Between Northern Large and Artisan International

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

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

Diversification Opportunities for Northern Large and Artisan International

0.65

Correlation Coefficient

Northern Large  Artisan International

Poor diversification

The 3 months correlation between Northern and Artisan is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Northern Large Cap and Artisan International Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Artisan International and Northern Large 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 Large Cap are associated (or correlated) with Artisan International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Artisan International has no effect on the direction of Northern Large i.e., Northern Large and Artisan International go up and down completely randomly.

Pair Corralation between Northern Large and Artisan International

Assuming the 90 days horizon Northern Large Cap is expected to under-perform the Artisan International. But the mutual fund apears to be less risky and, when comparing its historical volatility, Northern Large Cap is 1.1 times less risky than Artisan International. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Artisan International Fund is currently generating about 0.45 of returns per unit of risk over similar time horizon. If you would invest  2,817  in Artisan International Fund on December 5, 2024 and sell it today you would earn a total of  169.00  from holding Artisan International Fund or generate 6.0% return on investment over 90 days.

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

Northern Large Cap  vs.  Artisan International Fund

Northern Large Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Northern Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Artisan International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Artisan International Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Artisan International 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 Large and Artisan International

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

The idea behind Northern Large Cap and Artisan International Fund 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 Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..