Correlation Between Absolute Core and Northern Lights
Can any of the company-specific risk be diversified away by investing in both Absolute Core and Northern Lights 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 Core and Northern Lights into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Absolute Core Strategy and Northern Lights, you can compare the effects of market volatilities on Absolute Core and Northern Lights 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 Core with a short position of Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absolute Core and Northern Lights.
Diversification Opportunities for Absolute Core and Northern Lights
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 Core Strategy and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and Absolute Core 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 Core Strategy are associated (or correlated) with Northern Lights. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Lights has no effect on the direction of Absolute Core i.e., Absolute Core and Northern Lights go up and down completely randomly.
Pair Corralation between Absolute Core and Northern Lights
Given the investment horizon of 90 days Absolute Core Strategy is expected to generate 0.75 times more return on investment than Northern Lights. However, Absolute Core Strategy is 1.33 times less risky than Northern Lights. It trades about 0.11 of its potential returns per unit of risk. Northern Lights is currently generating about 0.06 per unit of risk. If you would invest 2,879 in Absolute Core Strategy on December 2, 2024 and sell it today you would earn a total of 457.00 from holding Absolute Core Strategy or generate 15.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Absolute Core Strategy vs. Northern Lights
Performance |
| Timeline |
| Absolute Core Strategy |
| Northern Lights |
Absolute Core and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Absolute Core and Northern Lights
The main advantage of trading using opposite Absolute Core and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Absolute Core position performs unexpectedly, Northern Lights 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 Lights will offset losses from the drop in Northern Lights' long position.| Absolute Core vs. Anfield Equity Sector | Absolute Core vs. AdvisorShares Dorsey Wright | Absolute Core vs. First Trust Active | Absolute Core vs. Aptus Collared Income |
| Northern Lights vs. Sterling Capital Focus | Northern Lights vs. Northern Lights | Northern Lights vs. First Trust Exchange Traded | Northern Lights vs. Northern Lights |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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