Correlation Between Nine Energy and Northern Lights
Can any of the company-specific risk be diversified away by investing in both Nine Energy 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 Nine Energy and Northern Lights into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nine Energy Service and Northern Lights, you can compare the effects of market volatilities on Nine Energy 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 Nine Energy with a short position of Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nine Energy and Northern Lights.
Diversification Opportunities for Nine Energy and Northern Lights
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nine and Northern is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Nine Energy Service and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and Nine Energy 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 Nine Energy Service 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 Nine Energy i.e., Nine Energy and Northern Lights go up and down completely randomly.
Pair Corralation between Nine Energy and Northern Lights
Given the investment horizon of 90 days Nine Energy Service is expected to under-perform the Northern Lights. In addition to that, Nine Energy is 11.22 times more volatile than Northern Lights. It trades about -0.04 of its total potential returns per unit of risk. Northern Lights is currently generating about -0.08 per unit of volatility. If you would invest 2,906 in Northern Lights on September 12, 2024 and sell it today you would lose (37.00) from holding Northern Lights or give up 1.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nine Energy Service vs. Northern Lights
Performance |
| Timeline |
| Nine Energy Service |
| Northern Lights |
Nine Energy and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nine Energy and Northern Lights
The main advantage of trading using opposite Nine Energy and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nine Energy 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.| Nine Energy vs. Baker Hughes Co | Nine Energy vs. NOV Inc | Nine Energy vs. Weatherford International PLC | Nine Energy vs. Tenaris SA ADR |
| Northern Lights vs. Freedom Day Dividend | Northern Lights vs. Franklin Templeton ETF | Northern Lights vs. iShares MSCI China | Northern Lights 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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