Correlation Between Northern Lights and IShares Core
Can any of the company-specific risk be diversified away by investing in both Northern Lights and IShares Core 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 IShares Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Lights and iShares Core Growth, you can compare the effects of market volatilities on Northern Lights and IShares Core 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 IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Lights and IShares Core.
Diversification Opportunities for Northern Lights and IShares Core
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Northern and IShares is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and iShares Core Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core Growth 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 IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core Growth has no effect on the direction of Northern Lights i.e., Northern Lights and IShares Core go up and down completely randomly.
Pair Corralation between Northern Lights and IShares Core
Given the investment horizon of 90 days Northern Lights is expected to generate 2.4 times more return on investment than IShares Core. However, Northern Lights is 2.4 times more volatile than iShares Core Growth. It trades about 0.14 of its potential returns per unit of risk. iShares Core Growth is currently generating about -0.01 per unit of risk. If you would invest 2,639 in Northern Lights on August 30, 2024 and sell it today you would earn a total of 154.00 from holding Northern Lights or generate 5.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Lights vs. iShares Core Growth
Performance |
| Timeline |
| Northern Lights |
| iShares Core Growth |
Northern Lights and IShares Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Lights and IShares Core
The main advantage of trading using opposite Northern Lights and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Lights position performs unexpectedly, IShares Core 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 IShares Core will offset losses from the drop in IShares Core's long position.| Northern Lights vs. Freedom Day Dividend | Northern Lights vs. Franklin Templeton ETF | Northern Lights vs. iShares MSCI China | Northern Lights vs. Tidal Trust II |
| IShares Core vs. Alpha Architect Gdsdn | IShares Core vs. VanEck Inflation Allocation | IShares Core vs. ClearShares OCIO ETF | IShares Core vs. Northern Lights |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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