Correlation Between Northern Lights and Sterling Capital
Can any of the company-specific risk be diversified away by investing in both Northern Lights and Sterling Capital 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 Sterling Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Lights and Sterling Capital Focus, you can compare the effects of market volatilities on Northern Lights and Sterling Capital 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 Sterling Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Lights and Sterling Capital.
Diversification Opportunities for Northern Lights and Sterling Capital
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Northern and Sterling is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and Sterling Capital Focus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Capital Focus 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 Sterling Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Capital Focus has no effect on the direction of Northern Lights i.e., Northern Lights and Sterling Capital go up and down completely randomly.
Pair Corralation between Northern Lights and Sterling Capital
Given the investment horizon of 90 days Northern Lights is expected to generate 2.64 times less return on investment than Sterling Capital. But when comparing it to its historical volatility, Northern Lights is 1.73 times less risky than Sterling Capital. It trades about 0.2 of its potential returns per unit of risk. Sterling Capital Focus is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 2,856 in Sterling Capital Focus on August 27, 2024 and sell it today you would earn a total of 253.00 from holding Sterling Capital Focus or generate 8.86% 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. Sterling Capital Focus
Performance |
| Timeline |
| Northern Lights |
| Sterling Capital Focus |
Northern Lights and Sterling Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Lights and Sterling Capital
The main advantage of trading using opposite Northern Lights and Sterling Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Lights position performs unexpectedly, Sterling Capital 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 Sterling Capital will offset losses from the drop in Sterling Capital'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 |
| Sterling Capital vs. Absolute Core Strategy | Sterling Capital vs. iShares ESG Advanced | Sterling Capital vs. PIMCO RAFI Dynamic | Sterling Capital vs. HCM Defender 100 |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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