Correlation Between Northern Lights and PeakShares Sector
Can any of the company-specific risk be diversified away by investing in both Northern Lights and PeakShares Sector 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 PeakShares Sector into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Lights and PeakShares Sector Rotation, you can compare the effects of market volatilities on Northern Lights and PeakShares Sector 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 PeakShares Sector. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Lights and PeakShares Sector.
Diversification Opportunities for Northern Lights and PeakShares Sector
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Northern and PeakShares is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and PeakShares Sector Rotation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PeakShares Sector 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 PeakShares Sector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PeakShares Sector has no effect on the direction of Northern Lights i.e., Northern Lights and PeakShares Sector go up and down completely randomly.
Pair Corralation between Northern Lights and PeakShares Sector
Given the investment horizon of 90 days Northern Lights is expected to generate 1.86 times less return on investment than PeakShares Sector. But when comparing it to its historical volatility, Northern Lights is 1.1 times less risky than PeakShares Sector. It trades about 0.08 of its potential returns per unit of risk. PeakShares Sector Rotation is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 2,461 in PeakShares Sector Rotation on August 30, 2024 and sell it today you would earn a total of 398.00 from holding PeakShares Sector Rotation or generate 16.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 80.0% |
| Values | Daily Returns |
Northern Lights vs. PeakShares Sector Rotation
Performance |
| Timeline |
| Northern Lights |
| PeakShares Sector |
Northern Lights and PeakShares Sector Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Lights and PeakShares Sector
The main advantage of trading using opposite Northern Lights and PeakShares Sector positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Lights position performs unexpectedly, PeakShares Sector 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 PeakShares Sector will offset losses from the drop in PeakShares Sector'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 |
| PeakShares Sector vs. Freedom Day Dividend | PeakShares Sector vs. Franklin Templeton ETF | PeakShares Sector vs. iShares MSCI China | PeakShares Sector vs. Tidal Trust II |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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