Correlation Between Northern Lights and Innovator Premium
Can any of the company-specific risk be diversified away by investing in both Northern Lights and Innovator Premium 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 Innovator Premium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Lights and Innovator Premium Income, you can compare the effects of market volatilities on Northern Lights and Innovator Premium 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 Innovator Premium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Lights and Innovator Premium.
Diversification Opportunities for Northern Lights and Innovator Premium
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Northern and Innovator is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and Innovator Premium Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Premium Income 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 Innovator Premium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Premium Income has no effect on the direction of Northern Lights i.e., Northern Lights and Innovator Premium go up and down completely randomly.
Pair Corralation between Northern Lights and Innovator Premium
Given the investment horizon of 90 days Northern Lights is expected to generate 6.45 times more return on investment than Innovator Premium. However, Northern Lights is 6.45 times more volatile than Innovator Premium Income. It trades about 0.13 of its potential returns per unit of risk. Innovator Premium Income is currently generating about 0.18 per unit of risk. If you would invest 3,189 in Northern Lights on September 1, 2024 and sell it today you would earn a total of 406.00 from holding Northern Lights or generate 12.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
Northern Lights vs. Innovator Premium Income
Performance |
| Timeline |
| Northern Lights |
| Innovator Premium Income |
Northern Lights and Innovator Premium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Lights and Innovator Premium
The main advantage of trading using opposite Northern Lights and Innovator Premium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Lights position performs unexpectedly, Innovator Premium 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 Innovator Premium will offset losses from the drop in Innovator Premium'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 |
| Innovator Premium vs. Innovator ETFs Trust | Innovator Premium vs. First Trust Cboe | Innovator Premium vs. Innovator SP 500 | Innovator Premium vs. Innovator Equity Power |
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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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