Correlation Between Northern Lights and SPDR FTSE
Can any of the company-specific risk be diversified away by investing in both Northern Lights and SPDR FTSE 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 FTSE 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 FTSE International, you can compare the effects of market volatilities on Northern Lights and SPDR FTSE 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 FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Lights and SPDR FTSE.
Diversification Opportunities for Northern Lights and SPDR FTSE
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Northern and SPDR is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and SPDR FTSE International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR FTSE International 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 FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR FTSE International has no effect on the direction of Northern Lights i.e., Northern Lights and SPDR FTSE go up and down completely randomly.
Pair Corralation between Northern Lights and SPDR FTSE
Given the investment horizon of 90 days Northern Lights is expected to under-perform the SPDR FTSE. In addition to that, Northern Lights is 2.41 times more volatile than SPDR FTSE International. It trades about -0.29 of its total potential returns per unit of risk. SPDR FTSE International is currently generating about 0.17 per unit of volatility. If you would invest 3,702 in SPDR FTSE International on December 16, 2024 and sell it today you would earn a total of 67.00 from holding SPDR FTSE International or generate 1.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Lights vs. SPDR FTSE International
Performance |
| Timeline |
| Northern Lights |
| SPDR FTSE International |
Northern Lights and SPDR FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Lights and SPDR FTSE
The main advantage of trading using opposite Northern Lights and SPDR FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Lights position performs unexpectedly, SPDR FTSE 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 FTSE will offset losses from the drop in SPDR FTSE's long position.| Northern Lights vs. Sterling Capital Focus | ||
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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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