Correlation Between Northern Lights and ETRACS IFED
Can any of the company-specific risk be diversified away by investing in both Northern Lights and ETRACS IFED 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 ETRACS IFED into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Lights and ETRACS IFED Invest, you can compare the effects of market volatilities on Northern Lights and ETRACS IFED 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 ETRACS IFED. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Lights and ETRACS IFED.
Diversification Opportunities for Northern Lights and ETRACS IFED
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Northern and ETRACS is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and ETRACS IFED Invest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETRACS IFED Invest 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 ETRACS IFED. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETRACS IFED Invest has no effect on the direction of Northern Lights i.e., Northern Lights and ETRACS IFED go up and down completely randomly.
Pair Corralation between Northern Lights and ETRACS IFED
Given the investment horizon of 90 days Northern Lights is expected to generate 1.07 times less return on investment than ETRACS IFED. But when comparing it to its historical volatility, Northern Lights is 1.32 times less risky than ETRACS IFED. It trades about 0.11 of its potential returns per unit of risk. ETRACS IFED Invest is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,781 in ETRACS IFED Invest on August 30, 2024 and sell it today you would earn a total of 1,475 from holding ETRACS IFED Invest or generate 53.04% 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. ETRACS IFED Invest
Performance |
| Timeline |
| Northern Lights |
| ETRACS IFED Invest |
Northern Lights and ETRACS IFED Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Lights and ETRACS IFED
The main advantage of trading using opposite Northern Lights and ETRACS IFED positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Lights position performs unexpectedly, ETRACS IFED 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 ETRACS IFED will offset losses from the drop in ETRACS IFED's long position.| Northern Lights vs. iShares MSCI USA | Northern Lights vs. iShares MSCI USA | Northern Lights vs. iShares MSCI USA | Northern Lights vs. iShares Expanded Tech Software |
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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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