Correlation Between Northern Lights and Roundhill BIG
Can any of the company-specific risk be diversified away by investing in both Northern Lights and Roundhill BIG 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 BIG 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 BIG Tech, you can compare the effects of market volatilities on Northern Lights and Roundhill BIG 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 BIG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Lights and Roundhill BIG.
Diversification Opportunities for Northern Lights and Roundhill BIG
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Northern and Roundhill is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and Roundhill BIG Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roundhill BIG Tech 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 BIG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roundhill BIG Tech has no effect on the direction of Northern Lights i.e., Northern Lights and Roundhill BIG go up and down completely randomly.
Pair Corralation between Northern Lights and Roundhill BIG
Given the investment horizon of 90 days Northern Lights is expected to generate 1.36 times less return on investment than Roundhill BIG. But when comparing it to its historical volatility, Northern Lights is 2.02 times less risky than Roundhill BIG. It trades about 0.37 of its potential returns per unit of risk. Roundhill BIG Tech is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 4,746 in Roundhill BIG Tech on September 1, 2024 and sell it today you would earn a total of 354.00 from holding Roundhill BIG Tech or generate 7.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Lights vs. Roundhill BIG Tech
Performance |
| Timeline |
| Northern Lights |
| Roundhill BIG Tech |
Northern Lights and Roundhill BIG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Lights and Roundhill BIG
The main advantage of trading using opposite Northern Lights and Roundhill BIG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Lights position performs unexpectedly, Roundhill BIG 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 BIG will offset losses from the drop in Roundhill BIG's long position.| Northern Lights vs. Sterling Capital Focus | Northern Lights vs. Roundhill ETF Trust | Northern Lights vs. Northern Lights | Northern Lights vs. First Trust Exchange Traded |
| Roundhill BIG vs. Roundhill Acquirers Deep | Roundhill BIG vs. FT Vest Equity | Roundhill BIG vs. Zillow Group Class | Roundhill BIG vs. Northern Lights |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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