Correlation Between Income Fund and North Star
Can any of the company-specific risk be diversified away by investing in both Income Fund and North Star 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 Income Fund and North Star into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Income Fund Of and North Star Opportunity, you can compare the effects of market volatilities on Income Fund and North Star 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 Income Fund with a short position of North Star. Check out your portfolio center. Please also check ongoing floating volatility patterns of Income Fund and North Star.
Diversification Opportunities for Income Fund and North Star
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Income and North is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Income Fund Of and North Star Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North Star Opportunity and Income Fund 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 Income Fund Of are associated (or correlated) with North Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North Star Opportunity has no effect on the direction of Income Fund i.e., Income Fund and North Star go up and down completely randomly.
Pair Corralation between Income Fund and North Star
Assuming the 90 days horizon Income Fund is expected to generate 1.4 times less return on investment than North Star. But when comparing it to its historical volatility, Income Fund Of is 1.46 times less risky than North Star. It trades about 0.05 of its potential returns per unit of risk. North Star Opportunity is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,462 in North Star Opportunity on September 25, 2024 and sell it today you would earn a total of 273.00 from holding North Star Opportunity or generate 18.67% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Income Fund Of vs. North Star Opportunity
Performance |
Timeline |
Income Fund |
North Star Opportunity |
Income Fund and North Star Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Income Fund and North Star
The main advantage of trading using opposite Income Fund and North Star positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Income Fund position performs unexpectedly, North Star 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 North Star will offset losses from the drop in North Star's long position.Income Fund vs. Capital Income Builder | Income Fund vs. Capital World Growth | Income Fund vs. American Balanced Fund | Income Fund vs. Growth Fund Of |
North Star vs. North Star Bond | North Star vs. North Star Dividend | North Star vs. North Star Micro | North Star vs. North Star Opportunity |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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