Correlation Between Northern Lights and Innovator Equity
Can any of the company-specific risk be diversified away by investing in both Northern Lights and Innovator Equity 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 Equity 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 Equity Defined, you can compare the effects of market volatilities on Northern Lights and Innovator Equity 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 Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Lights and Innovator Equity.
Diversification Opportunities for Northern Lights and Innovator Equity
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Northern and Innovator is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and Innovator Equity Defined in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Equity Defined 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 Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Equity Defined has no effect on the direction of Northern Lights i.e., Northern Lights and Innovator Equity go up and down completely randomly.
Pair Corralation between Northern Lights and Innovator Equity
Given the investment horizon of 90 days Northern Lights is expected to generate 3.95 times more return on investment than Innovator Equity. However, Northern Lights is 3.95 times more volatile than Innovator Equity Defined. It trades about 0.12 of its potential returns per unit of risk. Innovator Equity Defined is currently generating about 0.19 per unit of risk. If you would invest 2,622 in Northern Lights on September 2, 2024 and sell it today you would earn a total of 973.00 from holding Northern Lights or generate 37.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 29.03% |
| Values | Daily Returns |
Northern Lights vs. Innovator Equity Defined
Performance |
| Timeline |
| Northern Lights |
| Innovator Equity Defined |
Northern Lights and Innovator Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Lights and Innovator Equity
The main advantage of trading using opposite Northern Lights and Innovator Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Lights position performs unexpectedly, Innovator Equity 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 Equity will offset losses from the drop in Innovator Equity'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 Equity vs. FT Vest Equity | Innovator Equity vs. Northern Lights | Innovator Equity vs. Dimensional International High | Innovator Equity vs. Matthews China Discovery |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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