Correlation Between Northern Tax-advantaged and Pace High

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

By analyzing existing cross correlation between Northern Tax Advantaged Ultra Short and Pace High Yield, you can compare the effects of market volatilities on Northern Tax-advantaged and Pace High 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 Tax-advantaged with a short position of Pace High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Tax-advantaged and Pace High.

Diversification Opportunities for Northern Tax-advantaged and Pace High

0.78

Correlation Coefficient

Northern Tax-advantaged  Pace High

Poor diversification

The 3 months correlation between Northern and Pace is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Northern Tax Advantaged Ultra and Pace High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pace High Yield and Northern Tax-advantaged 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 Tax Advantaged Ultra Short are associated (or correlated) with Pace High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pace High Yield has no effect on the direction of Northern Tax-advantaged i.e., Northern Tax-advantaged and Pace High go up and down completely randomly.

Pair Corralation between Northern Tax-advantaged and Pace High

Assuming the 90 days horizon Northern Tax Advantaged Ultra Short is expected to generate 0.54 times more return on investment than Pace High. However, Northern Tax Advantaged Ultra Short is 1.84 times less risky than Pace High. It trades about 0.13 of its potential returns per unit of risk. Pace High Yield is currently generating about 0.04 per unit of risk. If you would invest  1,011  in Northern Tax Advantaged Ultra Short on October 15, 2024 and sell it today you would earn a total of  6.00  from holding Northern Tax Advantaged Ultra Short or generate 0.59% return on investment over 90 days.

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

Northern Tax Advantaged Ultra   vs.  Pace High Yield

Northern Tax Advantaged

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Tax Advantaged Ultra Short are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Northern Tax-advantaged is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pace High Yield

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pace High Yield are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Pace High 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 Tax-advantaged and Pace High

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

The idea behind Northern Tax Advantaged Ultra Short and Pace 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.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.