Correlation Between Northern Lights and EA Series
Can any of the company-specific risk be diversified away by investing in both Northern Lights and EA Series 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 EA Series into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Lights and EA Series Trust, you can compare the effects of market volatilities on Northern Lights and EA Series 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 EA Series. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Lights and EA Series.
Diversification Opportunities for Northern Lights and EA Series
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Northern and MDLV is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and EA Series Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EA Series Trust 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 EA Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EA Series Trust has no effect on the direction of Northern Lights i.e., Northern Lights and EA Series go up and down completely randomly.
Pair Corralation between Northern Lights and EA Series
Given the investment horizon of 90 days Northern Lights is expected to generate 1.35 times more return on investment than EA Series. However, Northern Lights is 1.35 times more volatile than EA Series Trust. It trades about 0.13 of its potential returns per unit of risk. EA Series Trust is currently generating about 0.13 per unit of risk. If you would invest 2,813 in Northern Lights on August 29, 2024 and sell it today you would earn a total of 772.00 from holding Northern Lights or generate 27.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Lights vs. EA Series Trust
Performance |
| Timeline |
| Northern Lights |
| EA Series Trust |
Northern Lights and EA Series Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Lights and EA Series
The main advantage of trading using opposite Northern Lights and EA Series positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Lights position performs unexpectedly, EA Series 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 EA Series will offset losses from the drop in EA Series' 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 |
| EA Series vs. FT Vest Equity | EA Series vs. Northern Lights | EA Series vs. Dimensional International High | EA Series vs. First Trust Exchange Traded |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
Other Complementary Tools
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities |