Correlation Between Northern Lights and Karat Packaging
Can any of the company-specific risk be diversified away by investing in both Northern Lights and Karat Packaging 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 Northern Lights and Karat Packaging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Lights and Karat Packaging, you can compare the effects of market volatilities on Northern Lights and Karat Packaging 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 Northern Lights with a short position of Karat Packaging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Lights and Karat Packaging.
Diversification Opportunities for Northern Lights and Karat Packaging
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Northern and Karat is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and Karat Packaging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Karat Packaging and Northern Lights 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 Northern Lights are associated (or correlated) with Karat Packaging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Karat Packaging has no effect on the direction of Northern Lights i.e., Northern Lights and Karat Packaging go up and down completely randomly.
Pair Corralation between Northern Lights and Karat Packaging
Considering the 90-day investment horizon Northern Lights is expected to generate 2.72 times less return on investment than Karat Packaging. But when comparing it to its historical volatility, Northern Lights is 3.72 times less risky than Karat Packaging. It trades about 0.12 of its potential returns per unit of risk. Karat Packaging is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,033 in Karat Packaging on September 14, 2024 and sell it today you would earn a total of 1,211 from holding Karat Packaging or generate 59.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Lights vs. Karat Packaging
Performance |
| Timeline |
| Northern Lights |
| Karat Packaging |
Northern Lights and Karat Packaging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Lights and Karat Packaging
The main advantage of trading using opposite Northern Lights and Karat Packaging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Lights position performs unexpectedly, Karat Packaging 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 Karat Packaging will offset losses from the drop in Karat Packaging's long position.| Northern Lights vs. Karat Packaging | Northern Lights vs. Tidal ETF Trust | Northern Lights vs. First Trust Enhanced | Northern Lights vs. Western Asset Premier |
| Karat Packaging vs. Greif Bros | Karat Packaging vs. Reynolds Consumer Products | Karat Packaging vs. Silgan Holdings | Karat Packaging vs. O I Glass |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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