Correlation Between Northern Lights and Vanguard Intermediate
Can any of the company-specific risk be diversified away by investing in both Northern Lights and Vanguard Intermediate 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 Vanguard Intermediate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Lights and Vanguard Intermediate Term Treasury, you can compare the effects of market volatilities on Northern Lights and Vanguard Intermediate 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 Vanguard Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Lights and Vanguard Intermediate.
Diversification Opportunities for Northern Lights and Vanguard Intermediate
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Northern and Vanguard is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and Vanguard Intermediate Term Tre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Intermediate 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 Vanguard Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Intermediate has no effect on the direction of Northern Lights i.e., Northern Lights and Vanguard Intermediate go up and down completely randomly.
Pair Corralation between Northern Lights and Vanguard Intermediate
Given the investment horizon of 90 days Northern Lights is expected to generate 0.83 times more return on investment than Vanguard Intermediate. However, Northern Lights is 1.21 times less risky than Vanguard Intermediate. It trades about 0.19 of its potential returns per unit of risk. Vanguard Intermediate Term Treasury is currently generating about -0.15 per unit of risk. If you would invest 2,552 in Northern Lights on August 26, 2024 and sell it today you would earn a total of 21.00 from holding Northern Lights or generate 0.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Lights vs. Vanguard Intermediate Term Tre
Performance |
| Timeline |
| Northern Lights |
| Vanguard Intermediate |
Northern Lights and Vanguard Intermediate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Lights and Vanguard Intermediate
The main advantage of trading using opposite Northern Lights and Vanguard Intermediate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Lights position performs unexpectedly, Vanguard Intermediate 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 Vanguard Intermediate will offset losses from the drop in Vanguard Intermediate's long position.| Northern Lights vs. Blackrock Muniholdings Ny | Northern Lights vs. MFS Investment Grade | Northern Lights vs. Eaton Vance National | Northern Lights vs. Invesco High 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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