Correlation Between Invesco Aerospace and Northern Lights
Can any of the company-specific risk be diversified away by investing in both Invesco Aerospace 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 Invesco Aerospace and Northern Lights into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco Aerospace Defense and Northern Lights, you can compare the effects of market volatilities on Invesco Aerospace 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 Invesco Aerospace with a short position of Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Aerospace and Northern Lights.
Diversification Opportunities for Invesco Aerospace and Northern Lights
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Invesco and Northern is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Aerospace Defense and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and Invesco Aerospace 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 Invesco Aerospace Defense 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 Invesco Aerospace i.e., Invesco Aerospace and Northern Lights go up and down completely randomly.
Pair Corralation between Invesco Aerospace and Northern Lights
Considering the 90-day investment horizon Invesco Aerospace is expected to generate 1.13 times less return on investment than Northern Lights. In addition to that, Invesco Aerospace is 1.89 times more volatile than Northern Lights. It trades about 0.07 of its total potential returns per unit of risk. Northern Lights is currently generating about 0.15 per unit of volatility. If you would invest 3,466 in Northern Lights on August 24, 2024 and sell it today you would earn a total of 86.00 from holding Northern Lights or generate 2.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco Aerospace Defense vs. Northern Lights
Performance |
| Timeline |
| Invesco Aerospace Defense |
| Northern Lights |
Invesco Aerospace and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco Aerospace and Northern Lights
The main advantage of trading using opposite Invesco Aerospace and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Aerospace 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.| Invesco Aerospace vs. SPDR SP Aerospace | Invesco Aerospace vs. iShares Aerospace Defense | Invesco Aerospace vs. Invesco Dynamic Building | Invesco Aerospace vs. Invesco Dynamic Semiconductors |
| Northern Lights vs. Sterling Capital Focus | Northern Lights vs. Roundhill ETF Trust | Northern Lights vs. Northern Lights | Northern Lights vs. First Trust Exchange Traded |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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