Correlation Between Northern Lights and FT Vest
Can any of the company-specific risk be diversified away by investing in both Northern Lights and FT Vest 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 FT Vest into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Lights and FT Vest Nasdaq 100, you can compare the effects of market volatilities on Northern Lights and FT Vest 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 FT Vest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Lights and FT Vest.
Diversification Opportunities for Northern Lights and FT Vest
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Northern and QMAG is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and FT Vest Nasdaq 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT Vest 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 FT Vest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT Vest Nasdaq has no effect on the direction of Northern Lights i.e., Northern Lights and FT Vest go up and down completely randomly.
Pair Corralation between Northern Lights and FT Vest
Given the investment horizon of 90 days Northern Lights is expected to generate 1.56 times more return on investment than FT Vest. However, Northern Lights is 1.56 times more volatile than FT Vest Nasdaq 100. It trades about 0.12 of its potential returns per unit of risk. FT Vest Nasdaq 100 is currently generating about 0.11 per unit of risk. If you would invest 2,348 in Northern Lights on September 12, 2024 and sell it today you would earn a total of 1,284 from holding Northern Lights or generate 54.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 16.16% |
| Values | Daily Returns |
Northern Lights vs. FT Vest Nasdaq 100
Performance |
| Timeline |
| Northern Lights |
| FT Vest Nasdaq |
Northern Lights and FT Vest Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Lights and FT Vest
The main advantage of trading using opposite Northern Lights and FT Vest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Lights position performs unexpectedly, FT Vest 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 FT Vest will offset losses from the drop in FT Vest's long position.| Northern Lights vs. iShares Factors Growth | Northern Lights vs. Absolute Core Strategy | Northern Lights vs. iShares ESG Advanced | Northern Lights vs. PIMCO RAFI Dynamic |
| FT Vest vs. FT Vest Equity | FT Vest vs. Northern Lights | FT Vest vs. Dimensional International High | FT Vest vs. JPMorgan Fundamental Data |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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