Correlation Between Ocean Park and Northern Lights
Can any of the company-specific risk be diversified away by investing in both Ocean Park 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 Ocean Park and Northern Lights into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ocean Park International and Northern Lights, you can compare the effects of market volatilities on Ocean Park 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 Ocean Park with a short position of Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ocean Park and Northern Lights.
Diversification Opportunities for Ocean Park and Northern Lights
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ocean and Northern is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Ocean Park International and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and Ocean Park 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 Ocean Park International 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 Ocean Park i.e., Ocean Park and Northern Lights go up and down completely randomly.
Pair Corralation between Ocean Park and Northern Lights
Given the investment horizon of 90 days Ocean Park International is expected to under-perform the Northern Lights. In addition to that, Ocean Park is 1.23 times more volatile than Northern Lights. It trades about -0.01 of its total potential returns per unit of risk. Northern Lights is currently generating about 0.4 per unit of volatility. If you would invest 3,213 in Northern Lights on September 5, 2024 and sell it today you would earn a total of 194.00 from holding Northern Lights or generate 6.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ocean Park International vs. Northern Lights
Performance |
| Timeline |
| Ocean Park International |
| Northern Lights |
Ocean Park and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ocean Park and Northern Lights
The main advantage of trading using opposite Ocean Park and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ocean Park 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.| Ocean Park vs. iShares Core SP | Ocean Park vs. iShares Core 1 5 | Ocean Park vs. iShares Core MSCI | Ocean Park vs. iShares Core SP |
| Northern Lights vs. Northern Lights | Northern Lights vs. LHA Market State | Northern Lights vs. Innovator Nasdaq 100 Power | Northern Lights vs. ETF Series Solutions |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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