Correlation Between Northern Lights and Strategy Shares
Can any of the company-specific risk be diversified away by investing in both Northern Lights and Strategy Shares 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 Strategy Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Lights and Strategy Shares NewfoundReSolve, you can compare the effects of market volatilities on Northern Lights and Strategy Shares 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 Strategy Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Lights and Strategy Shares.
Diversification Opportunities for Northern Lights and Strategy Shares
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Northern and Strategy is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and Strategy Shares NewfoundReSolv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategy Shares Newf 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 Strategy Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategy Shares Newf has no effect on the direction of Northern Lights i.e., Northern Lights and Strategy Shares go up and down completely randomly.
Pair Corralation between Northern Lights and Strategy Shares
Given the investment horizon of 90 days Northern Lights is expected to generate 1.23 times less return on investment than Strategy Shares. In addition to that, Northern Lights is 1.06 times more volatile than Strategy Shares NewfoundReSolve. It trades about 0.07 of its total potential returns per unit of risk. Strategy Shares NewfoundReSolve is currently generating about 0.1 per unit of volatility. If you would invest 2,485 in Strategy Shares NewfoundReSolve on August 26, 2024 and sell it today you would earn a total of 740.00 from holding Strategy Shares NewfoundReSolve or generate 29.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Lights vs. Strategy Shares NewfoundReSolv
Performance |
| Timeline |
| Northern Lights |
| Strategy Shares Newf |
Northern Lights and Strategy Shares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Lights and Strategy Shares
The main advantage of trading using opposite Northern Lights and Strategy Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Lights position performs unexpectedly, Strategy Shares 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 Strategy Shares will offset losses from the drop in Strategy Shares' long position.| Northern Lights vs. Northern Lights | Northern Lights vs. LHA Market State | Northern Lights vs. Innovator Nasdaq 100 Power | Northern Lights vs. ETF Series Solutions |
| Strategy Shares vs. Cambria Trinity ETF | Strategy Shares vs. Northern Lights | Strategy Shares vs. Cambria Global Momentum | Strategy Shares vs. Alpha Architect Value |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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