Correlation Between American Funds and Northern Lights
Can any of the company-specific risk be diversified away by investing in both American Funds 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 American Funds and Northern Lights into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Fundamental and Northern Lights, you can compare the effects of market volatilities on American Funds 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 American Funds with a short position of Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Northern Lights.
Diversification Opportunities for American Funds and Northern Lights
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Northern is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Fundamental and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and American Funds 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 American Funds Fundamental 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 American Funds i.e., American Funds and Northern Lights go up and down completely randomly.
Pair Corralation between American Funds and Northern Lights
Assuming the 90 days horizon American Funds Fundamental is expected to generate 1.27 times more return on investment than Northern Lights. However, American Funds is 1.27 times more volatile than Northern Lights. It trades about 0.06 of its potential returns per unit of risk. Northern Lights is currently generating about 0.05 per unit of risk. If you would invest 7,352 in American Funds Fundamental on November 3, 2024 and sell it today you would earn a total of 1,066 from holding American Funds Fundamental or generate 14.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 92.31% |
| Values | Daily Returns |
American Funds Fundamental vs. Northern Lights
Performance |
| Timeline |
| American Funds Funda |
| Northern Lights |
American Funds and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Northern Lights
The main advantage of trading using opposite American Funds and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds 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.| American Funds vs. Federated Emerging Market | American Funds vs. Siit Emerging Markets | American Funds vs. Mid Cap 15x Strategy | American Funds vs. Ashmore Emerging Markets |
| Northern Lights vs. First Trust Multi Asset | Northern Lights vs. Collaborative Investment Series | Northern Lights vs. Northern Lights | Northern Lights vs. Ocean Park International |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
Other Complementary Tools
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities |