Correlation Between Northern Lights and Cabana Target
Can any of the company-specific risk be diversified away by investing in both Northern Lights and Cabana Target 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 Cabana Target into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Lights and Cabana Target Leading, you can compare the effects of market volatilities on Northern Lights and Cabana Target 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 Cabana Target. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Lights and Cabana Target.
Diversification Opportunities for Northern Lights and Cabana Target
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Northern and Cabana is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and Cabana Target Leading in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cabana Target Leading 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 Cabana Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cabana Target Leading has no effect on the direction of Northern Lights i.e., Northern Lights and Cabana Target go up and down completely randomly.
Pair Corralation between Northern Lights and Cabana Target
Given the investment horizon of 90 days Northern Lights is expected to generate 0.64 times more return on investment than Cabana Target. However, Northern Lights is 1.55 times less risky than Cabana Target. It trades about 0.14 of its potential returns per unit of risk. Cabana Target Leading is currently generating about 0.07 per unit of risk. If you would invest 2,542 in Northern Lights on August 26, 2024 and sell it today you would earn a total of 419.00 from holding Northern Lights or generate 16.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Lights vs. Cabana Target Leading
Performance |
| Timeline |
| Northern Lights |
| Cabana Target Leading |
Northern Lights and Cabana Target Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Lights and Cabana Target
The main advantage of trading using opposite Northern Lights and Cabana Target positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Lights position performs unexpectedly, Cabana Target 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 Cabana Target will offset losses from the drop in Cabana Target's long position.The idea behind Northern Lights and Cabana Target Leading 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.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.
Other Complementary Tools
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Stocks Directory Find actively traded stocks across global markets |