Correlation Between Northern Lights and Roundhill ETF
Can any of the company-specific risk be diversified away by investing in both Northern Lights and Roundhill ETF 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 Roundhill ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Lights and Roundhill ETF Trust, you can compare the effects of market volatilities on Northern Lights and Roundhill ETF 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 Roundhill ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Lights and Roundhill ETF.
Diversification Opportunities for Northern Lights and Roundhill ETF
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Northern and Roundhill is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and Roundhill ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roundhill ETF Trust 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 Roundhill ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roundhill ETF Trust has no effect on the direction of Northern Lights i.e., Northern Lights and Roundhill ETF go up and down completely randomly.
Pair Corralation between Northern Lights and Roundhill ETF
Given the investment horizon of 90 days Northern Lights is expected to generate 12.5 times less return on investment than Roundhill ETF. But when comparing it to its historical volatility, Northern Lights is 3.29 times less risky than Roundhill ETF. It trades about 0.02 of its potential returns per unit of risk. Roundhill ETF Trust is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,915 in Roundhill ETF Trust on August 27, 2024 and sell it today you would earn a total of 953.00 from holding Roundhill ETF Trust or generate 49.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Lights vs. Roundhill ETF Trust
Performance |
| Timeline |
| Northern Lights |
| Roundhill ETF Trust |
Northern Lights and Roundhill ETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Lights and Roundhill ETF
The main advantage of trading using opposite Northern Lights and Roundhill ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Lights position performs unexpectedly, Roundhill ETF 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 Roundhill ETF will offset losses from the drop in Roundhill ETF's long position.| Northern Lights vs. Northern Lights | Northern Lights vs. Northern Lights | Northern Lights vs. Mairs Power Minnesota | Northern Lights vs. Innovator Russell 2000 |
| Roundhill ETF vs. Sterling Capital Focus | Roundhill ETF vs. Northern Lights | Roundhill ETF vs. Innovator Russell 2000 | Roundhill ETF vs. AdvisorShares Q Dynamic |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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