Correlation Between SSGA Active and Northern Lights
Can any of the company-specific risk be diversified away by investing in both SSGA Active and Northern Lights 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 SSGA Active and Northern Lights into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SSGA Active Trust and Northern Lights, you can compare the effects of market volatilities on SSGA Active and Northern Lights 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 SSGA Active with a short position of Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of SSGA Active and Northern Lights.
Diversification Opportunities for SSGA Active and Northern Lights
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between SSGA and Northern is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding SSGA Active Trust and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and SSGA Active 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 SSGA Active Trust are associated (or correlated) with Northern Lights. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Lights has no effect on the direction of SSGA Active i.e., SSGA Active and Northern Lights go up and down completely randomly.
Pair Corralation between SSGA Active and Northern Lights
Given the investment horizon of 90 days SSGA Active is expected to generate 4.8 times less return on investment than Northern Lights. But when comparing it to its historical volatility, SSGA Active Trust is 4.08 times less risky than Northern Lights. It trades about 0.09 of its potential returns per unit of risk. Northern Lights is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2,717 in Northern Lights on August 26, 2024 and sell it today you would earn a total of 846.00 from holding Northern Lights or generate 31.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SSGA Active Trust vs. Northern Lights
Performance |
| Timeline |
| SSGA Active Trust |
| Northern Lights |
SSGA Active and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SSGA Active and Northern Lights
The main advantage of trading using opposite SSGA Active and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SSGA Active position performs unexpectedly, Northern Lights 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 Northern Lights will offset losses from the drop in Northern Lights' long position.| SSGA Active vs. BlackRock Intermediate Muni | SSGA Active vs. SSGA Active Trust | SSGA Active vs. SPDR MarketAxess Investment | SSGA Active vs. SSGA Active Trust |
| Northern Lights vs. Sterling Capital Focus | Northern Lights vs. Roundhill ETF Trust | Northern Lights vs. Northern Lights | Northern Lights 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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