Correlation Between Northern Lights and SPDR Portfolio
Can any of the company-specific risk be diversified away by investing in both Northern Lights and SPDR Portfolio 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 SPDR Portfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Lights and SPDR Portfolio SP, you can compare the effects of market volatilities on Northern Lights and SPDR Portfolio 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 SPDR Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Lights and SPDR Portfolio.
Diversification Opportunities for Northern Lights and SPDR Portfolio
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Northern and SPDR is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and SPDR Portfolio SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Portfolio SP 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 SPDR Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Portfolio SP has no effect on the direction of Northern Lights i.e., Northern Lights and SPDR Portfolio go up and down completely randomly.
Pair Corralation between Northern Lights and SPDR Portfolio
Given the investment horizon of 90 days Northern Lights is expected to generate 0.76 times more return on investment than SPDR Portfolio. However, Northern Lights is 1.31 times less risky than SPDR Portfolio. It trades about -0.2 of its potential returns per unit of risk. SPDR Portfolio SP is currently generating about -0.2 per unit of risk. If you would invest 3,585 in Northern Lights on December 24, 2024 and sell it today you would lose (195.00) from holding Northern Lights or give up 5.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Lights vs. SPDR Portfolio SP
Performance |
| Timeline |
| Northern Lights |
| SPDR Portfolio SP |
Northern Lights and SPDR Portfolio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Lights and SPDR Portfolio
The main advantage of trading using opposite Northern Lights and SPDR Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Lights position performs unexpectedly, SPDR Portfolio 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 SPDR Portfolio will offset losses from the drop in SPDR Portfolio's long position.| Northern Lights vs. Sterling Capital Focus | Northern Lights vs. Northern Lights | Northern Lights vs. First Trust Exchange Traded | Northern Lights vs. Northern Lights |
| SPDR Portfolio vs. FT Vest Equity | SPDR Portfolio vs. Northern Lights | SPDR Portfolio vs. Dimensional International High | SPDR Portfolio 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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