Correlation Between ProShares Merger and Northern Lights
Can any of the company-specific risk be diversified away by investing in both ProShares Merger 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 ProShares Merger and Northern Lights into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares Merger ETF and Northern Lights, you can compare the effects of market volatilities on ProShares Merger 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 ProShares Merger with a short position of Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Merger and Northern Lights.
Diversification Opportunities for ProShares Merger and Northern Lights
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ProShares and Northern is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Merger ETF and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and ProShares Merger 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 ProShares Merger ETF 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 ProShares Merger i.e., ProShares Merger and Northern Lights go up and down completely randomly.
Pair Corralation between ProShares Merger and Northern Lights
Given the investment horizon of 90 days ProShares Merger ETF is expected to under-perform the Northern Lights. But the etf apears to be less risky and, when comparing its historical volatility, ProShares Merger ETF is 2.08 times less risky than Northern Lights. The etf trades about -0.1 of its potential returns per unit of risk. The Northern Lights is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 2,317 in Northern Lights on September 1, 2024 and sell it today you would earn a total of 65.00 from holding Northern Lights or generate 2.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares Merger ETF vs. Northern Lights
Performance |
| Timeline |
| ProShares Merger ETF |
| Northern Lights |
ProShares Merger and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares Merger and Northern Lights
The main advantage of trading using opposite ProShares Merger and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Merger 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.| ProShares Merger vs. First Trust Managed | ProShares Merger vs. Franklin Liberty Systematic | ProShares Merger vs. Overlay Shares Foreign | ProShares Merger vs. First Trust LongShort |
| Northern Lights vs. Tidal Trust II | Northern Lights vs. ProShares Merger ETF | Northern Lights vs. Even Herd Long | Northern Lights vs. Simplify 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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