Correlation Between VanEck Fallen and Northern Lights
Can any of the company-specific risk be diversified away by investing in both VanEck Fallen 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 VanEck Fallen and Northern Lights into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VanEck Fallen Angel and Northern Lights, you can compare the effects of market volatilities on VanEck Fallen 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 VanEck Fallen with a short position of Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck Fallen and Northern Lights.
Diversification Opportunities for VanEck Fallen and Northern Lights
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between VanEck and Northern is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Fallen Angel and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and VanEck Fallen 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 VanEck Fallen Angel 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 VanEck Fallen i.e., VanEck Fallen and Northern Lights go up and down completely randomly.
Pair Corralation between VanEck Fallen and Northern Lights
Given the investment horizon of 90 days VanEck Fallen Angel is expected to generate 1.56 times more return on investment than Northern Lights. However, VanEck Fallen is 1.56 times more volatile than Northern Lights. It trades about 0.22 of its potential returns per unit of risk. Northern Lights is currently generating about 0.1 per unit of risk. If you would invest 2,879 in VanEck Fallen Angel on August 31, 2024 and sell it today you would earn a total of 39.00 from holding VanEck Fallen Angel or generate 1.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
VanEck Fallen Angel vs. Northern Lights
Performance |
| Timeline |
| VanEck Fallen Angel |
| Northern Lights |
VanEck Fallen and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VanEck Fallen and Northern Lights
The main advantage of trading using opposite VanEck Fallen and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck Fallen 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.| VanEck Fallen vs. iShares Fallen Angels | VanEck Fallen vs. VanEck Emerging Markets | VanEck Fallen vs. First Trust Multi Asset | VanEck Fallen vs. iShares 0 5 Year |
| Northern Lights vs. Northern Lights | Northern Lights vs. Innovator 20 Year | Northern Lights vs. Strategy Shares NewfoundReSolve | Northern Lights vs. Innovator SP 500 |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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