Correlation Between Northern Lights and PGIM Rock
Can any of the company-specific risk be diversified away by investing in both Northern Lights and PGIM Rock 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 PGIM Rock into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Lights and PGIM Rock ETF, you can compare the effects of market volatilities on Northern Lights and PGIM Rock 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 PGIM Rock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Lights and PGIM Rock.
Diversification Opportunities for Northern Lights and PGIM Rock
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Northern and PGIM is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and PGIM Rock ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PGIM Rock ETF 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 PGIM Rock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PGIM Rock ETF has no effect on the direction of Northern Lights i.e., Northern Lights and PGIM Rock go up and down completely randomly.
Pair Corralation between Northern Lights and PGIM Rock
Given the investment horizon of 90 days Northern Lights is expected to generate 1.7 times more return on investment than PGIM Rock. However, Northern Lights is 1.7 times more volatile than PGIM Rock ETF. It trades about 0.11 of its potential returns per unit of risk. PGIM Rock ETF is currently generating about 0.13 per unit of risk. If you would invest 3,008 in Northern Lights on August 28, 2024 and sell it today you would earn a total of 558.00 from holding Northern Lights or generate 18.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 89.47% |
| Values | Daily Returns |
Northern Lights vs. PGIM Rock ETF
Performance |
| Timeline |
| Northern Lights |
| PGIM Rock ETF |
Northern Lights and PGIM Rock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Lights and PGIM Rock
The main advantage of trading using opposite Northern Lights and PGIM Rock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Lights position performs unexpectedly, PGIM Rock 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 PGIM Rock will offset losses from the drop in PGIM Rock's long position.| Northern Lights vs. Invesco Dynamic Large | Northern Lights vs. Perella Weinberg Partners | Northern Lights vs. HUMANA INC | Northern Lights vs. Aquagold International |
| PGIM Rock vs. FT Vest Equity | PGIM Rock vs. Northern Lights | PGIM Rock vs. Dimensional International High | PGIM Rock 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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