Correlation Between Northern Lights and Vanguard Growth
Can any of the company-specific risk be diversified away by investing in both Northern Lights and Vanguard Growth 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 Vanguard Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Lights and Vanguard Growth Index, you can compare the effects of market volatilities on Northern Lights and Vanguard Growth 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 Vanguard Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Lights and Vanguard Growth.
Diversification Opportunities for Northern Lights and Vanguard Growth
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Northern and Vanguard is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and Vanguard Growth Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Growth Index 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 Vanguard Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Growth Index has no effect on the direction of Northern Lights i.e., Northern Lights and Vanguard Growth go up and down completely randomly.
Pair Corralation between Northern Lights and Vanguard Growth
Given the investment horizon of 90 days Northern Lights is expected to generate 1.08 times less return on investment than Vanguard Growth. In addition to that, Northern Lights is 1.0 times more volatile than Vanguard Growth Index. It trades about 0.32 of its total potential returns per unit of risk. Vanguard Growth Index is currently generating about 0.35 per unit of volatility. If you would invest 38,292 in Vanguard Growth Index on September 1, 2024 and sell it today you would earn a total of 2,621 from holding Vanguard Growth Index or generate 6.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Northern Lights vs. Vanguard Growth Index
Performance |
| Timeline |
| Northern Lights |
| Vanguard Growth Index |
Northern Lights and Vanguard Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Lights and Vanguard Growth
The main advantage of trading using opposite Northern Lights and Vanguard Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Lights position performs unexpectedly, Vanguard Growth 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 Vanguard Growth will offset losses from the drop in Vanguard Growth's long position.| Northern Lights vs. Vanguard Growth Index | Northern Lights vs. iShares Russell 1000 | Northern Lights vs. iShares SP 500 | Northern Lights vs. iShares Core SP |
| Vanguard Growth vs. Vanguard Value Index | Vanguard Growth vs. Vanguard Information Technology | Vanguard Growth vs. Vanguard Small Cap Growth | Vanguard Growth vs. Vanguard Dividend Appreciation |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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