Correlation Between Discipline Fund and Northern Lights
Can any of the company-specific risk be diversified away by investing in both Discipline Fund 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 Discipline Fund and Northern Lights into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Discipline Fund ETF and Northern Lights, you can compare the effects of market volatilities on Discipline Fund 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 Discipline Fund with a short position of Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of Discipline Fund and Northern Lights.
Diversification Opportunities for Discipline Fund and Northern Lights
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Discipline and Northern is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Discipline Fund ETF and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and Discipline Fund 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 Discipline Fund ETF 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 Discipline Fund i.e., Discipline Fund and Northern Lights go up and down completely randomly.
Pair Corralation between Discipline Fund and Northern Lights
Given the investment horizon of 90 days Discipline Fund ETF is expected to generate 0.89 times more return on investment than Northern Lights. However, Discipline Fund ETF is 1.12 times less risky than Northern Lights. It trades about 0.08 of its potential returns per unit of risk. Northern Lights is currently generating about -0.01 per unit of risk. If you would invest 2,297 in Discipline Fund ETF on September 12, 2024 and sell it today you would earn a total of 13.00 from holding Discipline Fund ETF or generate 0.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Discipline Fund ETF vs. Northern Lights
Performance |
| Timeline |
| Discipline Fund ETF |
| Northern Lights |
Discipline Fund and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Discipline Fund and Northern Lights
The main advantage of trading using opposite Discipline Fund and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discipline Fund 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.| Discipline Fund vs. ATAC Rotation ETF | Discipline Fund vs. Amplify BlackSwan ISWN | Discipline Fund vs. Tidal ETF Trust | Discipline Fund vs. Aptus Defined Risk |
| Northern Lights vs. iShares Core Growth | Northern Lights vs. Alpha Architect Gdsdn | Northern Lights vs. STF Tactical Growth | Northern Lights vs. Collaborative Investment Series |
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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