Correlation Between Northern Lights and Inspire SmallMid
Can any of the company-specific risk be diversified away by investing in both Northern Lights and Inspire SmallMid 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 Inspire SmallMid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Lights and Inspire SmallMid Cap, you can compare the effects of market volatilities on Northern Lights and Inspire SmallMid 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 Inspire SmallMid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Lights and Inspire SmallMid.
Diversification Opportunities for Northern Lights and Inspire SmallMid
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Northern and Inspire is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and Inspire SmallMid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inspire SmallMid Cap 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 Inspire SmallMid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inspire SmallMid Cap has no effect on the direction of Northern Lights i.e., Northern Lights and Inspire SmallMid go up and down completely randomly.
Pair Corralation between Northern Lights and Inspire SmallMid
Considering the 90-day investment horizon Northern Lights is expected to under-perform the Inspire SmallMid. But the etf apears to be less risky and, when comparing its historical volatility, Northern Lights is 4.54 times less risky than Inspire SmallMid. The etf trades about -0.05 of its potential returns per unit of risk. The Inspire SmallMid Cap is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 3,714 in Inspire SmallMid Cap on August 26, 2024 and sell it today you would earn a total of 302.00 from holding Inspire SmallMid Cap or generate 8.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Lights vs. Inspire SmallMid Cap
Performance |
| Timeline |
| Northern Lights |
| Inspire SmallMid Cap |
Northern Lights and Inspire SmallMid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Lights and Inspire SmallMid
The main advantage of trading using opposite Northern Lights and Inspire SmallMid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Lights position performs unexpectedly, Inspire SmallMid 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 Inspire SmallMid will offset losses from the drop in Inspire SmallMid's long position.| Northern Lights vs. Inspire SmallMid Cap | Northern Lights vs. Inspire Global Hope | Northern Lights vs. Northern Lights | Northern Lights vs. Inspire International ESG |
| Inspire SmallMid vs. Inspire Global Hope | Inspire SmallMid vs. Northern Lights | Inspire SmallMid vs. Inspire International ESG | Inspire SmallMid vs. Northern Lights |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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