Correlation Between Northern Lights and SPDR Gold
Can any of the company-specific risk be diversified away by investing in both Northern Lights and SPDR Gold 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 SPDR Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Lights and SPDR Gold Shares, you can compare the effects of market volatilities on Northern Lights and SPDR Gold 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 SPDR Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Lights and SPDR Gold.
Diversification Opportunities for Northern Lights and SPDR Gold
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Northern and SPDR is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and SPDR Gold Shares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Gold Shares 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 SPDR Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Gold Shares has no effect on the direction of Northern Lights i.e., Northern Lights and SPDR Gold go up and down completely randomly.
Pair Corralation between Northern Lights and SPDR Gold
Given the investment horizon of 90 days Northern Lights is expected to generate 0.62 times more return on investment than SPDR Gold. However, Northern Lights is 1.62 times less risky than SPDR Gold. It trades about 0.2 of its potential returns per unit of risk. SPDR Gold Shares is currently generating about -0.05 per unit of risk. If you would invest 3,452 in Northern Lights on August 26, 2024 and sell it today you would earn a total of 111.00 from holding Northern Lights or generate 3.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Lights vs. SPDR Gold Shares
Performance |
| Timeline |
| Northern Lights |
| SPDR Gold Shares |
Northern Lights and SPDR Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Lights and SPDR Gold
The main advantage of trading using opposite Northern Lights and SPDR Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Lights position performs unexpectedly, SPDR Gold 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 SPDR Gold will offset losses from the drop in SPDR Gold'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 |
| SPDR Gold vs. iShares Silver Trust | SPDR Gold vs. VanEck Gold Miners | SPDR Gold vs. SPDR SP 500 | SPDR Gold vs. United States Oil |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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