Correlation Between Northern Small and Timothy Plan

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

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

Diversification Opportunities for Northern Small and Timothy Plan

0.55

Correlation Coefficient

Northern Small  Timothy Plan

Very weak diversification

The 3 months correlation between Northern and Timothy is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Northern Small Cap and Timothy Plan Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timothy Plan Growth and Northern Small 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 Small Cap are associated (or correlated) with Timothy Plan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Timothy Plan Growth has no effect on the direction of Northern Small i.e., Northern Small and Timothy Plan go up and down completely randomly.

Pair Corralation between Northern Small and Timothy Plan

Assuming the 90 days horizon Northern Small Cap is expected to generate 3.48 times more return on investment than Timothy Plan. However, Northern Small is 3.48 times more volatile than Timothy Plan Growth. It trades about 0.07 of its potential returns per unit of risk. Timothy Plan Growth is currently generating about -0.07 per unit of risk. If you would invest  2,077  in Northern Small Cap on September 16, 2024 and sell it today you would earn a total of  109.00  from holding Northern Small Cap or generate 5.25% return on investment over 90 days.

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

Northern Small Cap  vs.  Timothy Plan Growth

Northern Small Cap

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Small Cap are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Northern Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Timothy Plan Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Timothy Plan Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Timothy Plan 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 Small and Timothy Plan

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

The idea behind Northern Small Cap and Timothy Plan Growth 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.