Correlation Between 3EDGE Dynamic and Northern Lights
Can any of the company-specific risk be diversified away by investing in both 3EDGE Dynamic 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 3EDGE Dynamic and Northern Lights into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 3EDGE Dynamic Fixed and Northern Lights, you can compare the effects of market volatilities on 3EDGE Dynamic 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 3EDGE Dynamic with a short position of Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3EDGE Dynamic and Northern Lights.
Diversification Opportunities for 3EDGE Dynamic and Northern Lights
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 3EDGE and Northern is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding 3EDGE Dynamic Fixed and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and 3EDGE Dynamic 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 3EDGE Dynamic Fixed 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 3EDGE Dynamic i.e., 3EDGE Dynamic and Northern Lights go up and down completely randomly.
Pair Corralation between 3EDGE Dynamic and Northern Lights
Given the investment horizon of 90 days 3EDGE Dynamic Fixed is expected to generate 0.41 times more return on investment than Northern Lights. However, 3EDGE Dynamic Fixed is 2.43 times less risky than Northern Lights. It trades about 0.16 of its potential returns per unit of risk. Northern Lights is currently generating about -0.07 per unit of risk. If you would invest 2,446 in 3EDGE Dynamic Fixed on October 26, 2024 and sell it today you would earn a total of 7.00 from holding 3EDGE Dynamic Fixed or generate 0.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
3EDGE Dynamic Fixed vs. Northern Lights
Performance |
| Timeline |
| 3EDGE Dynamic Fixed |
| Northern Lights |
3EDGE Dynamic and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 3EDGE Dynamic and Northern Lights
The main advantage of trading using opposite 3EDGE Dynamic and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3EDGE Dynamic 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.| 3EDGE Dynamic vs. MFS Active Exchange | 3EDGE Dynamic vs. First Trust Exchange Traded | 3EDGE Dynamic vs. Vanguard Intermediate Term Treasury | 3EDGE Dynamic vs. Vanguard Long Term Treasury |
| Northern Lights vs. MFS Active Exchange | Northern Lights vs. First Trust Exchange Traded | Northern Lights vs. Vanguard Intermediate Term Treasury | Northern Lights vs. Vanguard Long Term Treasury |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
Other Complementary Tools
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios |