Correlation Between ETRACS Monthly and Northern Lights
Can any of the company-specific risk be diversified away by investing in both ETRACS Monthly 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 ETRACS Monthly and Northern Lights into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ETRACS Monthly Pay and Northern Lights, you can compare the effects of market volatilities on ETRACS Monthly 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 ETRACS Monthly with a short position of Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETRACS Monthly and Northern Lights.
Diversification Opportunities for ETRACS Monthly and Northern Lights
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ETRACS and Northern is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding ETRACS Monthly Pay and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and ETRACS Monthly 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 ETRACS Monthly Pay 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 ETRACS Monthly i.e., ETRACS Monthly and Northern Lights go up and down completely randomly.
Pair Corralation between ETRACS Monthly and Northern Lights
Given the investment horizon of 90 days ETRACS Monthly Pay is expected to generate 0.9 times more return on investment than Northern Lights. However, ETRACS Monthly Pay is 1.11 times less risky than Northern Lights. It trades about 0.13 of its potential returns per unit of risk. Northern Lights is currently generating about 0.11 per unit of risk. If you would invest 1,794 in ETRACS Monthly Pay on September 1, 2024 and sell it today you would earn a total of 266.00 from holding ETRACS Monthly Pay or generate 14.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ETRACS Monthly Pay vs. Northern Lights
Performance |
| Timeline |
| ETRACS Monthly Pay |
| Northern Lights |
ETRACS Monthly and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ETRACS Monthly and Northern Lights
The main advantage of trading using opposite ETRACS Monthly and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETRACS Monthly 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.| ETRACS Monthly vs. ProShares VIX Mid Term | ETRACS Monthly vs. iPath Series B | ETRACS Monthly vs. ProShares Short Russell2000 |
| Northern Lights vs. Vanguard Total Stock | Northern Lights vs. SPDR SP 500 | Northern Lights vs. iShares Core SP | Northern Lights vs. Vanguard Dividend Appreciation |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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