Correlation Between LHA Market and Northern Lights
Can any of the company-specific risk be diversified away by investing in both LHA Market 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 LHA Market and Northern Lights into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LHA Market State and Northern Lights, you can compare the effects of market volatilities on LHA Market 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 LHA Market with a short position of Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of LHA Market and Northern Lights.
Diversification Opportunities for LHA Market and Northern Lights
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between LHA and Northern is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding LHA Market State and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and LHA Market 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 LHA Market State 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 LHA Market i.e., LHA Market and Northern Lights go up and down completely randomly.
Pair Corralation between LHA Market and Northern Lights
Given the investment horizon of 90 days LHA Market State is expected to under-perform the Northern Lights. But the etf apears to be less risky and, when comparing its historical volatility, LHA Market State is 1.48 times less risky than Northern Lights. The etf trades about -0.09 of its potential returns per unit of risk. The Northern Lights is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 3,121 in Northern Lights on August 29, 2024 and sell it today you would earn a total of 232.00 from holding Northern Lights or generate 7.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LHA Market State vs. Northern Lights
Performance |
| Timeline |
| LHA Market State |
| Northern Lights |
LHA Market and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LHA Market and Northern Lights
The main advantage of trading using opposite LHA Market and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LHA Market 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.| LHA Market vs. ETF Series Solutions | LHA Market vs. Northern Lights | LHA Market vs. Innovator Nasdaq 100 Power | LHA Market vs. Tidal ETF Trust |
| Northern Lights vs. Northern Lights | Northern Lights vs. LHA Market State | Northern Lights vs. Innovator Nasdaq 100 Power | Northern Lights vs. ETF Series Solutions |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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