Correlation Between Northern Intermediate and Northern Global
Can any of the company-specific risk be diversified away by investing in both Northern Intermediate and Northern Global 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 Intermediate and Northern Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Intermediate Tax Exempt and Northern Global Real, you can compare the effects of market volatilities on Northern Intermediate and Northern Global 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 Intermediate with a short position of Northern Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Intermediate and Northern Global.
Diversification Opportunities for Northern Intermediate and Northern Global
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Northern and Northern is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Northern Intermediate Tax Exem and Northern Global Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Global Real and Northern Intermediate 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 Intermediate Tax Exempt are associated (or correlated) with Northern Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Global Real has no effect on the direction of Northern Intermediate i.e., Northern Intermediate and Northern Global go up and down completely randomly.
Pair Corralation between Northern Intermediate and Northern Global
Assuming the 90 days horizon Northern Intermediate is expected to generate 1.63 times less return on investment than Northern Global. But when comparing it to its historical volatility, Northern Intermediate Tax Exempt is 6.68 times less risky than Northern Global. It trades about 0.26 of its potential returns per unit of risk. Northern Global Real is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 996.00 in Northern Global Real on June 7, 2025 and sell it today you would earn a total of 26.00 from holding Northern Global Real or generate 2.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Intermediate Tax Exem vs. Northern Global Real
Performance |
| Timeline |
| Northern Intermediate |
| Northern Global Real |
Northern Intermediate and Northern Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Intermediate and Northern Global
The main advantage of trading using opposite Northern Intermediate and Northern Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Intermediate position performs unexpectedly, Northern Global 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 Global will offset losses from the drop in Northern Global's long position.The idea behind Northern Intermediate Tax Exempt and Northern Global Real 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.| Northern Global vs. Northern Bond Index | Northern Global vs. Northern E Bond | Northern Global vs. Northern Arizona Tax Exempt | Northern Global vs. Northern Emerging Markets |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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