Correlation Between Northern Lights and Exchange Listed
Can any of the company-specific risk be diversified away by investing in both Northern Lights and Exchange Listed 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 Exchange Listed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Lights and Exchange Listed Funds, you can compare the effects of market volatilities on Northern Lights and Exchange Listed 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 Exchange Listed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Lights and Exchange Listed.
Diversification Opportunities for Northern Lights and Exchange Listed
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Northern and Exchange is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and Exchange Listed Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exchange Listed Funds 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 Exchange Listed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exchange Listed Funds has no effect on the direction of Northern Lights i.e., Northern Lights and Exchange Listed go up and down completely randomly.
Pair Corralation between Northern Lights and Exchange Listed
Given the investment horizon of 90 days Northern Lights is expected to generate 1.33 times less return on investment than Exchange Listed. But when comparing it to its historical volatility, Northern Lights is 1.16 times less risky than Exchange Listed. It trades about 0.11 of its potential returns per unit of risk. Exchange Listed Funds is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 2,498 in Exchange Listed Funds on August 30, 2024 and sell it today you would earn a total of 739.00 from holding Exchange Listed Funds or generate 29.58% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 47.68% |
Values | Daily Returns |
Northern Lights vs. Exchange Listed Funds
Performance |
Timeline |
Northern Lights |
Exchange Listed Funds |
Northern Lights and Exchange Listed Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Northern Lights and Exchange Listed
The main advantage of trading using opposite Northern Lights and Exchange Listed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Lights position performs unexpectedly, Exchange Listed 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 Exchange Listed will offset losses from the drop in Exchange Listed'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 |
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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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