Correlation Between Northern Lights and WBI BullBear
Can any of the company-specific risk be diversified away by investing in both Northern Lights and WBI BullBear 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 WBI BullBear into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Lights and WBI BullBear Quality, you can compare the effects of market volatilities on Northern Lights and WBI BullBear 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 WBI BullBear. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Lights and WBI BullBear.
Diversification Opportunities for Northern Lights and WBI BullBear
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Northern and WBI is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and WBI BullBear Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WBI BullBear Quality 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 WBI BullBear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WBI BullBear Quality has no effect on the direction of Northern Lights i.e., Northern Lights and WBI BullBear go up and down completely randomly.
Pair Corralation between Northern Lights and WBI BullBear
Given the investment horizon of 90 days Northern Lights is expected to generate 1.26 times less return on investment than WBI BullBear. But when comparing it to its historical volatility, Northern Lights is 1.04 times less risky than WBI BullBear. It trades about 0.22 of its potential returns per unit of risk. WBI BullBear Quality is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 3,531 in WBI BullBear Quality on August 30, 2024 and sell it today you would earn a total of 160.00 from holding WBI BullBear Quality or generate 4.53% 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. WBI BullBear Quality
Performance |
| Timeline |
| Northern Lights |
| WBI BullBear Quality |
Northern Lights and WBI BullBear Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Lights and WBI BullBear
The main advantage of trading using opposite Northern Lights and WBI BullBear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Lights position performs unexpectedly, WBI BullBear 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 WBI BullBear will offset losses from the drop in WBI BullBear's long position.| Northern Lights vs. iShares MSCI USA | Northern Lights vs. iShares MSCI USA | Northern Lights vs. iShares MSCI USA | Northern Lights vs. iShares Expanded Tech Software |
| WBI BullBear vs. FT Vest Equity | WBI BullBear vs. Northern Lights | WBI BullBear vs. Dimensional International High | WBI BullBear 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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