Correlation Between Northern Lights and SPDR BOFA
Can any of the company-specific risk be diversified away by investing in both Northern Lights and SPDR BOFA 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 SPDR BOFA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Lights and SPDR BOFA MERRILL, you can compare the effects of market volatilities on Northern Lights and SPDR BOFA 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 SPDR BOFA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Lights and SPDR BOFA.
Diversification Opportunities for Northern Lights and SPDR BOFA
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Northern and SPDR is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and SPDR BOFA MERRILL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR BOFA MERRILL 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 SPDR BOFA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR BOFA MERRILL has no effect on the direction of Northern Lights i.e., Northern Lights and SPDR BOFA go up and down completely randomly.
Pair Corralation between Northern Lights and SPDR BOFA
Given the investment horizon of 90 days Northern Lights is expected to under-perform the SPDR BOFA. But the etf apears to be less risky and, when comparing its historical volatility, Northern Lights is 3.82 times less risky than SPDR BOFA. The etf trades about 0.0 of its potential returns per unit of risk. The SPDR BOFA MERRILL is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 889.00 in SPDR BOFA MERRILL on September 12, 2024 and sell it today you would earn a total of 1,001 from holding SPDR BOFA MERRILL or generate 112.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 49.9% |
| Values | Daily Returns |
Northern Lights vs. SPDR BOFA MERRILL
Performance |
| Timeline |
| Northern Lights |
| SPDR BOFA MERRILL |
Northern Lights and SPDR BOFA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Lights and SPDR BOFA
The main advantage of trading using opposite Northern Lights and SPDR BOFA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Lights position performs unexpectedly, SPDR BOFA 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 SPDR BOFA will offset losses from the drop in SPDR BOFA'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 |
| SPDR BOFA vs. FT Vest Equity | SPDR BOFA vs. Northern Lights | SPDR BOFA vs. Dimensional International High | SPDR BOFA vs. JPMorgan Fundamental Data |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
Other Complementary Tools
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk |