Correlation Between MicroSectors FANG and Northern Lights
Can any of the company-specific risk be diversified away by investing in both MicroSectors FANG 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 MicroSectors FANG and Northern Lights into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MicroSectors FANG Index and Northern Lights, you can compare the effects of market volatilities on MicroSectors FANG 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 MicroSectors FANG with a short position of Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and Northern Lights.
Diversification Opportunities for MicroSectors FANG and Northern Lights
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between MicroSectors and Northern is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and MicroSectors FANG 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 MicroSectors FANG Index 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 MicroSectors FANG i.e., MicroSectors FANG and Northern Lights go up and down completely randomly.
Pair Corralation between MicroSectors FANG and Northern Lights
Given the investment horizon of 90 days MicroSectors FANG Index is expected to generate 5.54 times more return on investment than Northern Lights. However, MicroSectors FANG is 5.54 times more volatile than Northern Lights. It trades about 0.07 of its potential returns per unit of risk. Northern Lights is currently generating about 0.25 per unit of risk. If you would invest 1,262 in MicroSectors FANG Index on October 24, 2024 and sell it today you would earn a total of 50.00 from holding MicroSectors FANG Index or generate 3.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MicroSectors FANG Index vs. Northern Lights
Performance |
| Timeline |
| MicroSectors FANG Index |
| Northern Lights |
MicroSectors FANG and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MicroSectors FANG and Northern Lights
The main advantage of trading using opposite MicroSectors FANG and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors FANG 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.| MicroSectors FANG vs. MicroSectors FANG Index | MicroSectors FANG vs. Direxion Daily Semiconductor | MicroSectors FANG vs. Direxion Daily Technology | MicroSectors FANG vs. Direxion Daily SP |
| Northern Lights vs. Karat Packaging | Northern Lights vs. Tidal ETF Trust | Northern Lights vs. First Trust Enhanced | Northern Lights vs. Western Asset Premier |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
Other Complementary Tools
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences |