Correlation Between Northern Lights and Global X
Can any of the company-specific risk be diversified away by investing in both Northern Lights and Global X 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 Global X into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Lights and Global X NASDAQ, you can compare the effects of market volatilities on Northern Lights and Global X 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 Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Lights and Global X.
Diversification Opportunities for Northern Lights and Global X
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Northern and Global is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and Global X NASDAQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X NASDAQ 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 Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X NASDAQ has no effect on the direction of Northern Lights i.e., Northern Lights and Global X go up and down completely randomly.
Pair Corralation between Northern Lights and Global X
Given the investment horizon of 90 days Northern Lights is expected to generate 0.89 times more return on investment than Global X. However, Northern Lights is 1.13 times less risky than Global X. It trades about 0.2 of its potential returns per unit of risk. Global X NASDAQ is currently generating about 0.1 per unit of risk. If you would invest 3,452 in Northern Lights on August 26, 2024 and sell it today you would earn a total of 111.00 from holding Northern Lights or generate 3.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Lights vs. Global X NASDAQ
Performance |
| Timeline |
| Northern Lights |
| Global X NASDAQ |
Northern Lights and Global X Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Lights and Global X
The main advantage of trading using opposite Northern Lights and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Lights position performs unexpectedly, Global X 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 Global X will offset losses from the drop in Global X'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 |
| Global X vs. FT Vest Equity | Global X vs. Northern Lights | Global X vs. Dimensional International High | Global X 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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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