Correlation Between Northern Lights and DEUTSCHE MID
Can any of the company-specific risk be diversified away by investing in both Northern Lights and DEUTSCHE MID 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 DEUTSCHE MID into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Lights and DEUTSCHE MID CAP, you can compare the effects of market volatilities on Northern Lights and DEUTSCHE MID 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 DEUTSCHE MID. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Lights and DEUTSCHE MID.
Diversification Opportunities for Northern Lights and DEUTSCHE MID
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Northern and DEUTSCHE is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and DEUTSCHE MID CAP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DEUTSCHE MID CAP 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 DEUTSCHE MID. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DEUTSCHE MID CAP has no effect on the direction of Northern Lights i.e., Northern Lights and DEUTSCHE MID go up and down completely randomly.
Pair Corralation between Northern Lights and DEUTSCHE MID
Given the investment horizon of 90 days Northern Lights is expected to generate 3.95 times more return on investment than DEUTSCHE MID. However, Northern Lights is 3.95 times more volatile than DEUTSCHE MID CAP. It trades about 0.2 of its potential returns per unit of risk. DEUTSCHE MID CAP is currently generating about 0.24 per unit of risk. If you would invest 3,453 in Northern Lights on August 28, 2024 and sell it today you would earn a total of 113.00 from holding Northern Lights or generate 3.27% 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. DEUTSCHE MID CAP
Performance |
| Timeline |
| Northern Lights |
| DEUTSCHE MID CAP |
Northern Lights and DEUTSCHE MID Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Lights and DEUTSCHE MID
The main advantage of trading using opposite Northern Lights and DEUTSCHE MID positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Lights position performs unexpectedly, DEUTSCHE MID 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 DEUTSCHE MID will offset losses from the drop in DEUTSCHE MID'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 |
| DEUTSCHE MID vs. Financial Investors Trust | DEUTSCHE MID vs. ALPSSmith Credit Opportunities | DEUTSCHE MID vs. ALPSSmith Credit Opportunities | DEUTSCHE MID vs. DEUTSCHE MID CAP |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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