Correlation Between Absolute Convertible and Northern International
Can any of the company-specific risk be diversified away by investing in both Absolute Convertible and Northern 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 Absolute Convertible and Northern International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Absolute Convertible Arbitrage and Northern International Equity, you can compare the effects of market volatilities on Absolute Convertible and Northern 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 Absolute Convertible with a short position of Northern International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absolute Convertible and Northern International.
Diversification Opportunities for Absolute Convertible and Northern International
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Absolute and Northern is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Absolute Convertible Arbitrage and Northern International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern International and Absolute Convertible 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 Absolute Convertible Arbitrage are associated (or correlated) with Northern International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern International has no effect on the direction of Absolute Convertible i.e., Absolute Convertible and Northern International go up and down completely randomly.
Pair Corralation between Absolute Convertible and Northern International
Assuming the 90 days horizon Absolute Convertible is expected to generate 3.19 times less return on investment than Northern International. But when comparing it to its historical volatility, Absolute Convertible Arbitrage is 9.85 times less risky than Northern International. It trades about 0.44 of its potential returns per unit of risk. Northern International Equity is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1,674 in Northern International Equity on June 8, 2025 and sell it today you would earn a total of 36.00 from holding Northern International Equity or generate 2.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Absolute Convertible Arbitrage vs. Northern International Equity
Performance |
| Timeline |
| Absolute Convertible |
| Northern International |
Absolute Convertible and Northern International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Absolute Convertible and Northern International
The main advantage of trading using opposite Absolute Convertible and Northern International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Absolute Convertible position performs unexpectedly, Northern 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 Northern International will offset losses from the drop in Northern International's long position.| Absolute Convertible vs. First Eagle Gold | Absolute Convertible vs. Global Gold Fund | Absolute Convertible vs. The Gold Bullion | Absolute Convertible vs. International Investors Gold |
| Northern International vs. Needham Aggressive Growth | Northern International vs. T Rowe Price | Northern International vs. Qs Growth Fund | Northern International vs. Auer Growth Fund |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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