Correlation Between Northern Large and Science Technology

Can any of the company-specific risk be diversified away by investing in both Northern Large and Science Technology 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 Large and Science Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Northern Large Cap and Science Technology Fund, you can compare the effects of market volatilities on Northern Large and Science Technology 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 Large with a short position of Science Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Large and Science Technology.

Diversification Opportunities for Northern Large and Science Technology

0.91

Correlation Coefficient

Northern Large  Science Technology

Almost no diversification

The 3 months correlation between Northern and Science is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Northern Large Cap and Science Technology Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Science Technology and Northern Large 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 Large Cap are associated (or correlated) with Science Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Science Technology has no effect on the direction of Northern Large i.e., Northern Large and Science Technology go up and down completely randomly.

Pair Corralation between Northern Large and Science Technology

Assuming the 90 days horizon Northern Large Cap is expected to under-perform the Science Technology. But the mutual fund apears to be less risky and, when comparing its historical volatility, Northern Large Cap is 2.26 times less risky than Science Technology. The mutual fund trades about -0.15 of its potential returns per unit of risk. The Science Technology Fund is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,892  in Science Technology Fund on September 12, 2024 and sell it today you would earn a total of  47.00  from holding Science Technology Fund or generate 1.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Northern Large Cap  vs.  Science Technology Fund

Northern Large Cap

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Large Cap are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Northern Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Science Technology

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Science Technology Fund are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Science Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Northern Large and Science Technology

The main advantage of trading using opposite Northern Large and Science Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Large position performs unexpectedly, Science Technology 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 Science Technology will offset losses from the drop in Science Technology's long position.

The idea behind Northern Large Cap and Science Technology Fund 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.