Correlation Between Northern and Arga Emerging

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

By analyzing existing cross correlation between Northern Quality Esg and Arga Emerging Markets, you can compare the effects of market volatilities on Northern and Arga Emerging 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 with a short position of Arga Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern and Arga Emerging.

Diversification Opportunities for Northern and Arga Emerging

-0.51

Correlation Coefficient

Northern  Arga Emerging

Excellent diversification

The 3 months correlation between Northern and Arga is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Northern Quality Esg and Arga Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arga Emerging Markets and Northern 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 Quality Esg are associated (or correlated) with Arga Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arga Emerging Markets has no effect on the direction of Northern i.e., Northern and Arga Emerging go up and down completely randomly.

Pair Corralation between Northern and Arga Emerging

Assuming the 90 days horizon Northern Quality Esg is expected to generate 0.99 times more return on investment than Arga Emerging. However, Northern Quality Esg is 1.01 times less risky than Arga Emerging. It trades about -0.18 of its potential returns per unit of risk. Arga Emerging Markets is currently generating about -0.26 per unit of risk. If you would invest  2,219  in Northern Quality Esg on October 6, 2024 and sell it today you would lose (80.00) from holding Northern Quality Esg or give up 3.61% of portfolio value over 90 days.

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

Northern Quality Esg  vs.  Arga Emerging Markets

Northern Quality Esg

Risk-Adjusted Performance

5 of 100

Modest

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

Arga Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arga Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Northern and Arga Emerging

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

The idea behind Northern Quality Esg and Arga Emerging Markets 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.