Correlation Between Northern Lights and Alger 35
Can any of the company-specific risk be diversified away by investing in both Northern Lights and Alger 35 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 Alger 35 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Lights and Alger 35 ETF, you can compare the effects of market volatilities on Northern Lights and Alger 35 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 Alger 35. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Lights and Alger 35.
Diversification Opportunities for Northern Lights and Alger 35
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Northern and Alger is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and Alger 35 ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger 35 ETF 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 Alger 35. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger 35 ETF has no effect on the direction of Northern Lights i.e., Northern Lights and Alger 35 go up and down completely randomly.
Pair Corralation between Northern Lights and Alger 35
Given the investment horizon of 90 days Northern Lights is expected to generate 1.73 times less return on investment than Alger 35. But when comparing it to its historical volatility, Northern Lights is 1.74 times less risky than Alger 35. It trades about 0.12 of its potential returns per unit of risk. Alger 35 ETF is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 2,063 in Alger 35 ETF on August 29, 2024 and sell it today you would earn a total of 448.00 from holding Alger 35 ETF or generate 21.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Lights vs. Alger 35 ETF
Performance |
| Timeline |
| Northern Lights |
| Alger 35 ETF |
Northern Lights and Alger 35 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Lights and Alger 35
The main advantage of trading using opposite Northern Lights and Alger 35 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Lights position performs unexpectedly, Alger 35 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 Alger 35 will offset losses from the drop in Alger 35's long position.| Northern Lights vs. iShares MSCI USA | Northern Lights vs. iShares MSCI USA | Northern Lights vs. iShares MSCI USA | Northern Lights vs. iShares Expanded Tech Software |
| Alger 35 vs. Sterling Capital Focus | Alger 35 vs. Northern Lights | Alger 35 vs. AdvisorShares Dorsey Wright | Alger 35 vs. 6 Meridian Quality |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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