Correlation Between Northern Lights and Freedom Day
Can any of the company-specific risk be diversified away by investing in both Northern Lights and Freedom Day 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 Freedom Day into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Lights and Freedom Day Dividend, you can compare the effects of market volatilities on Northern Lights and Freedom Day 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 Freedom Day. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Lights and Freedom Day.
Diversification Opportunities for Northern Lights and Freedom Day
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Northern and Freedom is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and Freedom Day Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freedom Day Dividend 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 Freedom Day. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freedom Day Dividend has no effect on the direction of Northern Lights i.e., Northern Lights and Freedom Day go up and down completely randomly.
Pair Corralation between Northern Lights and Freedom Day
Considering the 90-day investment horizon Northern Lights is expected to generate 2.28 times less return on investment than Freedom Day. In addition to that, Northern Lights is 1.04 times more volatile than Freedom Day Dividend. It trades about 0.04 of its total potential returns per unit of risk. Freedom Day Dividend is currently generating about 0.1 per unit of volatility. If you would invest 2,375 in Freedom Day Dividend on November 28, 2024 and sell it today you would earn a total of 1,042 from holding Freedom Day Dividend or generate 43.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 72.01% |
| Values | Daily Returns |
Northern Lights vs. Freedom Day Dividend
Performance |
| Timeline |
| Northern Lights |
| Freedom Day Dividend |
Northern Lights and Freedom Day Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Lights and Freedom Day
The main advantage of trading using opposite Northern Lights and Freedom Day positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Lights position performs unexpectedly, Freedom Day 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 Freedom Day will offset losses from the drop in Freedom Day's long position.| Northern Lights vs. Strategy Shares | Northern Lights vs. Freedom Day Dividend | Northern Lights vs. Franklin Templeton ETF | Northern Lights vs. iShares MSCI China |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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