Correlation Between Intel and Northern Lights
Can any of the company-specific risk be diversified away by investing in both Intel 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 Intel and Northern Lights into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Intel and Northern Lights, you can compare the effects of market volatilities on Intel 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 Intel with a short position of Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intel and Northern Lights.
Diversification Opportunities for Intel and Northern Lights
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Intel and Northern is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Intel and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and Intel 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 Intel 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 Intel i.e., Intel and Northern Lights go up and down completely randomly.
Pair Corralation between Intel and Northern Lights
Given the investment horizon of 90 days Intel is expected to under-perform the Northern Lights. In addition to that, Intel is 7.86 times more volatile than Northern Lights. It trades about 0.0 of its total potential returns per unit of risk. Northern Lights is currently generating about 0.09 per unit of volatility. If you would invest 1,916 in Northern Lights on August 26, 2024 and sell it today you would earn a total of 279.00 from holding Northern Lights or generate 14.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Intel vs. Northern Lights
Performance |
| Timeline |
| Intel |
| Northern Lights |
Intel and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Intel and Northern Lights
The main advantage of trading using opposite Intel and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intel 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.The idea behind Intel and Northern Lights pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Northern Lights vs. First Trust TCW | Northern Lights vs. FolioBeyond Rising Rates | Northern Lights vs. SSGA Active Trust | Northern Lights vs. WisdomTree Alternative 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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