Correlation Between IShares Core and Northern Lights
Can any of the company-specific risk be diversified away by investing in both IShares Core 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 IShares Core and Northern Lights into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Core SP and Northern Lights, you can compare the effects of market volatilities on IShares Core 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 IShares Core with a short position of Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and Northern Lights.
Diversification Opportunities for IShares Core and Northern Lights
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and Northern is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and IShares Core 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 iShares Core SP 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 IShares Core i.e., IShares Core and Northern Lights go up and down completely randomly.
Pair Corralation between IShares Core and Northern Lights
Considering the 90-day investment horizon iShares Core SP is expected to generate 0.98 times more return on investment than Northern Lights. However, iShares Core SP is 1.03 times less risky than Northern Lights. It trades about 0.13 of its potential returns per unit of risk. Northern Lights is currently generating about 0.08 per unit of risk. If you would invest 37,280 in iShares Core SP on September 12, 2024 and sell it today you would earn a total of 23,698 from holding iShares Core SP or generate 63.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 49.9% |
| Values | Daily Returns |
iShares Core SP vs. Northern Lights
Performance |
| Timeline |
| iShares Core SP |
| Northern Lights |
IShares Core and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Core and Northern Lights
The main advantage of trading using opposite IShares Core and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core 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.| IShares Core vs. Vanguard SP 500 | IShares Core vs. Vanguard Real Estate | IShares Core vs. Vanguard Total Bond | IShares Core vs. Vanguard High Dividend |
| Northern Lights vs. Vanguard SP 500 | Northern Lights vs. Vanguard Real Estate | Northern Lights vs. Vanguard Total Bond | Northern Lights vs. Vanguard High Dividend |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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