Correlation Between Northern Lights and Brendan Wood
Can any of the company-specific risk be diversified away by investing in both Northern Lights and Brendan Wood 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 Brendan Wood into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Lights and Brendan Wood TopGun, you can compare the effects of market volatilities on Northern Lights and Brendan Wood 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 Brendan Wood. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Lights and Brendan Wood.
Diversification Opportunities for Northern Lights and Brendan Wood
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Northern and Brendan is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and Brendan Wood TopGun in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brendan Wood TopGun 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 Brendan Wood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brendan Wood TopGun has no effect on the direction of Northern Lights i.e., Northern Lights and Brendan Wood go up and down completely randomly.
Pair Corralation between Northern Lights and Brendan Wood
Given the investment horizon of 90 days Northern Lights is expected to generate 1.33 times more return on investment than Brendan Wood. However, Northern Lights is 1.33 times more volatile than Brendan Wood TopGun. It trades about 0.08 of its potential returns per unit of risk. Brendan Wood TopGun is currently generating about -0.16 per unit of risk. If you would invest 3,577 in Northern Lights on September 12, 2024 and sell it today you would earn a total of 41.00 from holding Northern Lights or generate 1.15% 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. Brendan Wood TopGun
Performance |
| Timeline |
| Northern Lights |
| Brendan Wood TopGun |
Northern Lights and Brendan Wood Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Lights and Brendan Wood
The main advantage of trading using opposite Northern Lights and Brendan Wood positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Lights position performs unexpectedly, Brendan Wood 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 Brendan Wood will offset losses from the drop in Brendan Wood's long position.| Northern Lights vs. iShares Factors Growth | Northern Lights vs. Absolute Core Strategy | Northern Lights vs. iShares ESG Advanced | Northern Lights vs. PIMCO RAFI Dynamic |
| Brendan Wood vs. FT Vest Equity | Brendan Wood vs. Northern Lights | Brendan Wood vs. Dimensional International High | Brendan Wood vs. JPMorgan Fundamental Data |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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