Correlation Between Northern Lights and Arrow DWA
Can any of the company-specific risk be diversified away by investing in both Northern Lights and Arrow DWA 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 Arrow DWA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Lights and Arrow DWA Tactical, you can compare the effects of market volatilities on Northern Lights and Arrow DWA 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 Arrow DWA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Lights and Arrow DWA.
Diversification Opportunities for Northern Lights and Arrow DWA
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Northern and Arrow is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and Arrow DWA Tactical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow DWA Tactical 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 Arrow DWA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow DWA Tactical has no effect on the direction of Northern Lights i.e., Northern Lights and Arrow DWA go up and down completely randomly.
Pair Corralation between Northern Lights and Arrow DWA
Given the investment horizon of 90 days Northern Lights is expected to generate 1.37 times more return on investment than Arrow DWA. However, Northern Lights is 1.37 times more volatile than Arrow DWA Tactical. It trades about 0.07 of its potential returns per unit of risk. Arrow DWA Tactical is currently generating about 0.0 per unit of risk. If you would invest 2,759 in Northern Lights on September 12, 2024 and sell it today you would earn a total of 24.00 from holding Northern Lights or generate 0.87% 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. Arrow DWA Tactical
Performance |
| Timeline |
| Northern Lights |
| Arrow DWA Tactical |
Northern Lights and Arrow DWA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Lights and Arrow DWA
The main advantage of trading using opposite Northern Lights and Arrow DWA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Lights position performs unexpectedly, Arrow DWA 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 Arrow DWA will offset losses from the drop in Arrow DWA's long position.| Northern Lights vs. Vanguard SP 500 | Northern Lights vs. Vanguard Real Estate | Northern Lights vs. Vanguard Total Bond | Northern Lights vs. Vanguard High Dividend |
| Arrow DWA vs. Arrow DWA Tactical | Arrow DWA vs. AlphaMark Actively Managed | Arrow DWA vs. FlexShares Real Assets | Arrow DWA vs. First Trust Income |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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