Correlation Between Northern Lights and Capital Group
Can any of the company-specific risk be diversified away by investing in both Northern Lights and Capital Group 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 Capital Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Lights and Capital Group International, you can compare the effects of market volatilities on Northern Lights and Capital Group 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 Capital Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Lights and Capital Group.
Diversification Opportunities for Northern Lights and Capital Group
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Northern and Capital is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and Capital Group International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Group Intern 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 Capital Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Group Intern has no effect on the direction of Northern Lights i.e., Northern Lights and Capital Group go up and down completely randomly.
Pair Corralation between Northern Lights and Capital Group
Given the investment horizon of 90 days Northern Lights is expected to generate 103.55 times less return on investment than Capital Group. But when comparing it to its historical volatility, Northern Lights is 120.7 times less risky than Capital Group. It trades about 0.11 of its potential returns per unit of risk. Capital Group International is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 0.00 in Capital Group International on September 12, 2024 and sell it today you would earn a total of 2,491 from holding Capital Group International or generate 9.223372036854776E16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 33.52% |
| Values | Daily Returns |
Northern Lights vs. Capital Group International
Performance |
| Timeline |
| Northern Lights |
| Capital Group Intern |
Northern Lights and Capital Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Lights and Capital Group
The main advantage of trading using opposite Northern Lights and Capital Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Lights position performs unexpectedly, Capital Group 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 Capital Group will offset losses from the drop in Capital Group'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 |
| Capital Group vs. FT Vest Equity | Capital Group vs. Northern Lights | Capital Group vs. Dimensional International High | Capital Group 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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