Correlation Between Northern Lights and Touchstone Dynamic
Can any of the company-specific risk be diversified away by investing in both Northern Lights and Touchstone Dynamic 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 Touchstone Dynamic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Lights and Touchstone Dynamic International, you can compare the effects of market volatilities on Northern Lights and Touchstone Dynamic 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 Touchstone Dynamic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Lights and Touchstone Dynamic.
Diversification Opportunities for Northern Lights and Touchstone Dynamic
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Northern and Touchstone is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and Touchstone Dynamic Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Dynamic 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 Touchstone Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Dynamic has no effect on the direction of Northern Lights i.e., Northern Lights and Touchstone Dynamic go up and down completely randomly.
Pair Corralation between Northern Lights and Touchstone Dynamic
Given the investment horizon of 90 days Northern Lights is expected to generate 0.84 times more return on investment than Touchstone Dynamic. However, Northern Lights is 1.19 times less risky than Touchstone Dynamic. It trades about 0.32 of its potential returns per unit of risk. Touchstone Dynamic International is currently generating about -0.01 per unit of risk. If you would invest 3,436 in Northern Lights on September 2, 2024 and sell it today you would earn a total of 159.00 from holding Northern Lights or generate 4.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Lights vs. Touchstone Dynamic Internation
Performance |
| Timeline |
| Northern Lights |
| Touchstone Dynamic |
Northern Lights and Touchstone Dynamic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Lights and Touchstone Dynamic
The main advantage of trading using opposite Northern Lights and Touchstone Dynamic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Lights position performs unexpectedly, Touchstone Dynamic 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 Touchstone Dynamic will offset losses from the drop in Touchstone Dynamic'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 |
| Touchstone Dynamic vs. FT Vest Equity | Touchstone Dynamic vs. Northern Lights | Touchstone Dynamic vs. Dimensional International High | Touchstone Dynamic vs. Matthews China Discovery |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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