Correlation Between Freedom Day and Northern Lights
Can any of the company-specific risk be diversified away by investing in both Freedom Day 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 Freedom Day and Northern Lights into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Freedom Day Dividend and Northern Lights, you can compare the effects of market volatilities on Freedom Day 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 Freedom Day with a short position of Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freedom Day and Northern Lights.
Diversification Opportunities for Freedom Day and Northern Lights
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Freedom and Northern is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Freedom Day Dividend and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and Freedom Day 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 Freedom Day Dividend 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 Freedom Day i.e., Freedom Day and Northern Lights go up and down completely randomly.
Pair Corralation between Freedom Day and Northern Lights
Given the investment horizon of 90 days Freedom Day Dividend is expected to generate 0.76 times more return on investment than Northern Lights. However, Freedom Day Dividend is 1.32 times less risky than Northern Lights. It trades about -0.01 of its potential returns per unit of risk. Northern Lights is currently generating about -0.18 per unit of risk. If you would invest 3,423 in Freedom Day Dividend on November 28, 2024 and sell it today you would lose (6.00) from holding Freedom Day Dividend or give up 0.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Freedom Day Dividend vs. Northern Lights
Performance |
| Timeline |
| Freedom Day Dividend |
| Northern Lights |
Freedom Day and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Freedom Day and Northern Lights
The main advantage of trading using opposite Freedom Day and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freedom Day 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.The idea behind Freedom Day Dividend and Northern Lights pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Northern Lights vs. Strategy Shares | Northern Lights vs. Freedom Day Dividend | Northern Lights vs. Franklin Templeton ETF | Northern Lights vs. iShares MSCI China |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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