Correlation Between Northern Small and American Funds
Can any of the company-specific risk be diversified away by investing in both Northern Small and American Funds 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 American Funds 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 American Funds Global, you can compare the effects of market volatilities on Northern Small and American Funds 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 American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Small and American Funds.
Diversification Opportunities for Northern Small and American Funds
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NORTHERN and American is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Northern Small Cap and American Funds Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Global 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 American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Global has no effect on the direction of Northern Small i.e., Northern Small and American Funds go up and down completely randomly.
Pair Corralation between Northern Small and American Funds
Assuming the 90 days horizon Northern Small Cap is expected to under-perform the American Funds. In addition to that, Northern Small is 1.21 times more volatile than American Funds Global. It trades about -0.04 of its total potential returns per unit of risk. American Funds Global is currently generating about -0.04 per unit of volatility. If you would invest 2,186 in American Funds Global on February 4, 2024 and sell it today you would lose (21.00) from holding American Funds Global or give up 0.96% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Northern Small Cap vs. American Funds Global
Performance |
Timeline |
Northern Small Cap |
American Funds Global |
Northern Small and American Funds Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Northern Small and American Funds
The main advantage of trading using opposite Northern Small and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Small position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.Northern Small vs. Fidelity Large Cap | Northern Small vs. Fidelity Small Cap | Northern Small vs. Fidelity Mid Cap | Northern Small vs. Fidelity Mid Cap |
American Funds vs. T Rowe Price | American Funds vs. T Rowe Price | American Funds vs. T Rowe Price | American Funds vs. T Rowe Price |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
Stocks Directory Find actively traded stocks across global markets |