Correlation Between Innovator Growth and Northern Lights
Can any of the company-specific risk be diversified away by investing in both Innovator Growth 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 Innovator Growth and Northern Lights into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Innovator Growth 100 Accelerated and Northern Lights, you can compare the effects of market volatilities on Innovator Growth 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 Innovator Growth with a short position of Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovator Growth and Northern Lights.
Diversification Opportunities for Innovator Growth and Northern Lights
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Innovator and Northern is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Innovator Growth 100 Accelerat and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and Innovator Growth 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 Innovator Growth 100 Accelerated 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 Innovator Growth i.e., Innovator Growth and Northern Lights go up and down completely randomly.
Pair Corralation between Innovator Growth and Northern Lights
Given the investment horizon of 90 days Innovator Growth 100 Accelerated is expected to generate 0.84 times more return on investment than Northern Lights. However, Innovator Growth 100 Accelerated is 1.2 times less risky than Northern Lights. It trades about 0.11 of its potential returns per unit of risk. Northern Lights is currently generating about 0.08 per unit of risk. If you would invest 3,074 in Innovator Growth 100 Accelerated on September 1, 2024 and sell it today you would earn a total of 661.00 from holding Innovator Growth 100 Accelerated or generate 21.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 89.22% |
| Values | Daily Returns |
Innovator Growth 100 Accelerat vs. Northern Lights
Performance |
| Timeline |
| Innovator Growth 100 |
| Northern Lights |
Innovator Growth and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Innovator Growth and Northern Lights
The main advantage of trading using opposite Innovator Growth and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innovator Growth 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.The idea behind Innovator Growth 100 Accelerated and Northern Lights pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| Northern Lights vs. Vanguard Growth Index | Northern Lights vs. iShares Russell 1000 | Northern Lights vs. iShares SP 500 | Northern Lights vs. iShares Core SP |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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