Correlation Between Northern Small and Multimanager Lifestyle
Can any of the company-specific risk be diversified away by investing in both Northern Small and Multimanager Lifestyle 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 Multimanager Lifestyle 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 Multimanager Lifestyle Moderate, you can compare the effects of market volatilities on Northern Small and Multimanager Lifestyle 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 Multimanager Lifestyle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Small and Multimanager Lifestyle.
Diversification Opportunities for Northern Small and Multimanager Lifestyle
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Northern and Multimanager is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Northern Small Cap and Multimanager Lifestyle Moderat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multimanager Lifestyle 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 Multimanager Lifestyle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multimanager Lifestyle has no effect on the direction of Northern Small i.e., Northern Small and Multimanager Lifestyle go up and down completely randomly.
Pair Corralation between Northern Small and Multimanager Lifestyle
Assuming the 90 days horizon Northern Small Cap is expected to generate 4.3 times more return on investment than Multimanager Lifestyle. However, Northern Small is 4.3 times more volatile than Multimanager Lifestyle Moderate. It trades about 0.27 of its potential returns per unit of risk. Multimanager Lifestyle Moderate is currently generating about 0.25 per unit of risk. If you would invest 1,285 in Northern Small Cap on June 1, 2025 and sell it today you would earn a total of 107.00 from holding Northern Small Cap or generate 8.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Small Cap vs. Multimanager Lifestyle Moderat
Performance |
| Timeline |
| Northern Small Cap |
| Multimanager Lifestyle |
Northern Small and Multimanager Lifestyle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Small and Multimanager Lifestyle
The main advantage of trading using opposite Northern Small and Multimanager Lifestyle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Small position performs unexpectedly, Multimanager Lifestyle 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 Multimanager Lifestyle will offset losses from the drop in Multimanager Lifestyle's long position.| Northern Small vs. American Beacon Large | Northern Small vs. Harbor International Fund | Northern Small vs. Credit Suisse Modity | Northern Small vs. Metropolitan West Total |
| Multimanager Lifestyle vs. Balanced Fund Retail | Multimanager Lifestyle vs. Qs Large Cap | Multimanager Lifestyle vs. Wabmsx | Multimanager Lifestyle vs. Furyax |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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