Correlation Between IShares Russell and Northern Lights
Can any of the company-specific risk be diversified away by investing in both IShares Russell 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 Russell 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 Russell 1000 and Northern Lights, you can compare the effects of market volatilities on IShares Russell 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 Russell with a short position of Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Russell and Northern Lights.
Diversification Opportunities for IShares Russell and Northern Lights
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between IShares and Northern is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares Russell 1000 and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and IShares Russell 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 Russell 1000 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 Russell i.e., IShares Russell and Northern Lights go up and down completely randomly.
Pair Corralation between IShares Russell and Northern Lights
Considering the 90-day investment horizon IShares Russell is expected to generate 114.26 times less return on investment than Northern Lights. But when comparing it to its historical volatility, iShares Russell 1000 is 120.94 times less risky than Northern Lights. It trades about 0.11 of its potential returns per unit of risk. Northern Lights is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 0.00 in Northern Lights on August 26, 2024 and sell it today you would earn a total of 2,754 from holding Northern Lights or generate 9.223372036854776E16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 19.72% |
| Values | Daily Returns |
iShares Russell 1000 vs. Northern Lights
Performance |
| Timeline |
| iShares Russell 1000 |
| Northern Lights |
IShares Russell and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Russell and Northern Lights
The main advantage of trading using opposite IShares Russell and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Russell 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 Russell vs. iShares Russell 3000 | IShares Russell vs. iShares Russell Mid Cap | IShares Russell vs. iShares Russell 1000 | IShares Russell vs. iShares Russell 2000 |
| Northern Lights vs. Morningstar Unconstrained Allocation | Northern Lights vs. High Yield Municipal Fund | Northern Lights vs. Via Renewables | Northern Lights vs. Knife River |
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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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