Correlation Between Northern Lights and Innovator
Can any of the company-specific risk be diversified away by investing in both Northern Lights and Innovator 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 Innovator into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Lights and Innovator SP 500, you can compare the effects of market volatilities on Northern Lights and Innovator 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 Innovator. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Lights and Innovator.
Diversification Opportunities for Northern Lights and Innovator
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Northern and Innovator is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and Innovator SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator SP 500 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 Innovator. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator SP 500 has no effect on the direction of Northern Lights i.e., Northern Lights and Innovator go up and down completely randomly.
Pair Corralation between Northern Lights and Innovator
Given the investment horizon of 90 days Northern Lights is expected to generate 3.25 times more return on investment than Innovator. However, Northern Lights is 3.25 times more volatile than Innovator SP 500. It trades about 0.13 of its potential returns per unit of risk. Innovator SP 500 is currently generating about 0.15 per unit of risk. If you would invest 3,189 in Northern Lights on September 1, 2024 and sell it today you would earn a total of 406.00 from holding Northern Lights or generate 12.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
Northern Lights vs. Innovator SP 500
Performance |
| Timeline |
| Northern Lights |
| Innovator SP 500 |
Northern Lights and Innovator Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Lights and Innovator
The main advantage of trading using opposite Northern Lights and Innovator positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Lights position performs unexpectedly, Innovator 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 Innovator will offset losses from the drop in Innovator'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 |
| Innovator vs. Innovator SP 500 | Innovator vs. Innovator SP 500 | Innovator vs. Innovator SP 500 | Innovator vs. Innovator SP 500 |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
Other Complementary Tools
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital |