Correlation Between Inspire SmallMid and Northern Lights
Can any of the company-specific risk be diversified away by investing in both Inspire SmallMid 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 Inspire SmallMid and Northern Lights into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Inspire SmallMid Cap and Northern Lights, you can compare the effects of market volatilities on Inspire SmallMid 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 Inspire SmallMid with a short position of Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inspire SmallMid and Northern Lights.
Diversification Opportunities for Inspire SmallMid and Northern Lights
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Inspire and Northern is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Inspire SmallMid Cap and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and Inspire SmallMid 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 Inspire SmallMid Cap 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 Inspire SmallMid i.e., Inspire SmallMid and Northern Lights go up and down completely randomly.
Pair Corralation between Inspire SmallMid and Northern Lights
Given the investment horizon of 90 days Inspire SmallMid is expected to generate 1.08 times less return on investment than Northern Lights. In addition to that, Inspire SmallMid is 1.23 times more volatile than Northern Lights. It trades about 0.05 of its total potential returns per unit of risk. Northern Lights is currently generating about 0.07 per unit of volatility. If you would invest 3,049 in Northern Lights on August 26, 2024 and sell it today you would earn a total of 1,154 from holding Northern Lights or generate 37.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Inspire SmallMid Cap vs. Northern Lights
Performance |
| Timeline |
| Inspire SmallMid Cap |
| Northern Lights |
Inspire SmallMid and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Inspire SmallMid and Northern Lights
The main advantage of trading using opposite Inspire SmallMid and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inspire SmallMid 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.| Inspire SmallMid vs. Invesco PureBeta MSCI | Inspire SmallMid vs. Aquagold International | Inspire SmallMid vs. Morningstar Unconstrained Allocation | Inspire SmallMid vs. High Yield Municipal Fund |
| Northern Lights vs. Inspire Global Hope | Northern Lights vs. Inspire SmallMid Cap | Northern Lights vs. Inspire International ESG | Northern Lights 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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