Correlation Between Northern Lights and Howard Hughes
Can any of the company-specific risk be diversified away by investing in both Northern Lights and Howard Hughes 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 Howard Hughes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Lights and Howard Hughes, you can compare the effects of market volatilities on Northern Lights and Howard Hughes 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 Howard Hughes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Lights and Howard Hughes.
Diversification Opportunities for Northern Lights and Howard Hughes
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Northern and Howard is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and Howard Hughes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Howard Hughes 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 Howard Hughes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Howard Hughes has no effect on the direction of Northern Lights i.e., Northern Lights and Howard Hughes go up and down completely randomly.
Pair Corralation between Northern Lights and Howard Hughes
Given the investment horizon of 90 days Northern Lights is expected to generate 0.45 times more return on investment than Howard Hughes. However, Northern Lights is 2.22 times less risky than Howard Hughes. It trades about 0.09 of its potential returns per unit of risk. Howard Hughes is currently generating about 0.0 per unit of risk. If you would invest 2,480 in Northern Lights on October 21, 2024 and sell it today you would earn a total of 995.00 from holding Northern Lights or generate 40.12% 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. Howard Hughes
Performance |
| Timeline |
| Northern Lights |
| Howard Hughes |
Northern Lights and Howard Hughes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Lights and Howard Hughes
The main advantage of trading using opposite Northern Lights and Howard Hughes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Lights position performs unexpectedly, Howard Hughes 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 Howard Hughes will offset losses from the drop in Howard Hughes' long position.| Northern Lights vs. Sterling Capital Focus | Northern Lights vs. Northern Lights | Northern Lights vs. First Trust Exchange Traded | Northern Lights vs. Northern Lights |
| Howard Hughes vs. New York City | Howard Hughes vs. FT Vest Equity | Howard Hughes vs. Zillow Group Class | Howard Hughes 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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