Correlation Between TrueShares Structured and Northern Lights
Can any of the company-specific risk be diversified away by investing in both TrueShares Structured 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 TrueShares Structured and Northern Lights into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TrueShares Structured Outcome and Northern Lights, you can compare the effects of market volatilities on TrueShares Structured 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 TrueShares Structured with a short position of Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of TrueShares Structured and Northern Lights.
Diversification Opportunities for TrueShares Structured and Northern Lights
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between TrueShares and Northern is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding TrueShares Structured Outcome and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and TrueShares Structured 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 TrueShares Structured Outcome 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 TrueShares Structured i.e., TrueShares Structured and Northern Lights go up and down completely randomly.
Pair Corralation between TrueShares Structured and Northern Lights
Given the investment horizon of 90 days TrueShares Structured is expected to generate 1.26 times less return on investment than Northern Lights. But when comparing it to its historical volatility, TrueShares Structured Outcome is 1.37 times less risky than Northern Lights. It trades about 0.12 of its potential returns per unit of risk. Northern Lights is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2,374 in Northern Lights on August 30, 2024 and sell it today you would earn a total of 1,200 from holding Northern Lights or generate 50.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
TrueShares Structured Outcome vs. Northern Lights
Performance |
| Timeline |
| TrueShares Structured |
| Northern Lights |
TrueShares Structured and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TrueShares Structured and Northern Lights
The main advantage of trading using opposite TrueShares Structured and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TrueShares Structured 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.| TrueShares Structured vs. FT Vest Equity | TrueShares Structured vs. Northern Lights | TrueShares Structured vs. Dimensional International High | TrueShares Structured vs. First Trust Exchange Traded |
| Northern Lights vs. iShares MSCI USA | Northern Lights vs. iShares MSCI USA | Northern Lights vs. iShares MSCI USA | Northern Lights vs. iShares Expanded Tech Software |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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