Correlation Between Northern Lights and Themes Small
Can any of the company-specific risk be diversified away by investing in both Northern Lights and Themes Small 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 Themes Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Lights and Themes Small Cap, you can compare the effects of market volatilities on Northern Lights and Themes Small 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 Themes Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Lights and Themes Small.
Diversification Opportunities for Northern Lights and Themes Small
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Northern and Themes is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and Themes Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Themes Small 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 Themes Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Themes Small Cap has no effect on the direction of Northern Lights i.e., Northern Lights and Themes Small go up and down completely randomly.
Pair Corralation between Northern Lights and Themes Small
Given the investment horizon of 90 days Northern Lights is expected to generate 49.9 times less return on investment than Themes Small. But when comparing it to its historical volatility, Northern Lights is 82.76 times less risky than Themes Small. It trades about 0.11 of its potential returns per unit of risk. Themes Small Cap is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 0.00 in Themes Small Cap on September 12, 2024 and sell it today you would earn a total of 3,270 from holding Themes Small Cap or generate 9.223372036854776E16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 71.31% |
| Values | Daily Returns |
Northern Lights vs. Themes Small Cap
Performance |
| Timeline |
| Northern Lights |
| Themes Small Cap |
Northern Lights and Themes Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Lights and Themes Small
The main advantage of trading using opposite Northern Lights and Themes Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Lights position performs unexpectedly, Themes Small 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 Themes Small will offset losses from the drop in Themes Small'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 |
| Themes Small vs. FT Vest Equity | Themes Small vs. Northern Lights | Themes Small vs. Dimensional International High | Themes Small 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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