Correlation Between Vanguard Total and Northern Lights
Can any of the company-specific risk be diversified away by investing in both Vanguard Total 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 Vanguard Total and Northern Lights into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Total Bond and Northern Lights, you can compare the effects of market volatilities on Vanguard Total 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 Vanguard Total with a short position of Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Northern Lights.
Diversification Opportunities for Vanguard Total and Northern Lights
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Vanguard and Northern is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Bond and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and Vanguard Total 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 Vanguard Total Bond 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 Vanguard Total i.e., Vanguard Total and Northern Lights go up and down completely randomly.
Pair Corralation between Vanguard Total and Northern Lights
Considering the 90-day investment horizon Vanguard Total is expected to generate 1.32 times less return on investment than Northern Lights. But when comparing it to its historical volatility, Vanguard Total Bond is 2.08 times less risky than Northern Lights. It trades about 0.15 of its potential returns per unit of risk. Northern Lights is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,743 in Northern Lights on September 13, 2024 and sell it today you would earn a total of 33.00 from holding Northern Lights or generate 1.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Total Bond vs. Northern Lights
Performance |
| Timeline |
| Vanguard Total Bond |
| Northern Lights |
Vanguard Total and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Total and Northern Lights
The main advantage of trading using opposite Vanguard Total and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total 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.| Vanguard Total vs. Vanguard Total International | Vanguard Total vs. Vanguard Total International | Vanguard Total vs. Vanguard Total Stock | Vanguard Total vs. Vanguard Real Estate |
| Northern Lights vs. First Trust Multi Asset | Northern Lights vs. Collaborative Investment Series | Northern Lights vs. EA Series Trust | Northern Lights vs. Aptus Defined Risk |
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 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.
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