Correlation Between Strategy Shares and Northern Lights
Can any of the company-specific risk be diversified away by investing in both Strategy Shares 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 Strategy Shares and Northern Lights into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Strategy Shares NewfoundReSolve and Northern Lights, you can compare the effects of market volatilities on Strategy Shares 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 Strategy Shares with a short position of Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strategy Shares and Northern Lights.
Diversification Opportunities for Strategy Shares and Northern Lights
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Strategy and Northern is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Strategy Shares NewfoundReSolv and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and Strategy Shares 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 Strategy Shares NewfoundReSolve 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 Strategy Shares i.e., Strategy Shares and Northern Lights go up and down completely randomly.
Pair Corralation between Strategy Shares and Northern Lights
Given the investment horizon of 90 days Strategy Shares NewfoundReSolve is expected to generate 0.92 times more return on investment than Northern Lights. However, Strategy Shares NewfoundReSolve is 1.09 times less risky than Northern Lights. It trades about 0.09 of its potential returns per unit of risk. Northern Lights is currently generating about 0.08 per unit of risk. If you would invest 2,403 in Strategy Shares NewfoundReSolve on August 29, 2024 and sell it today you would earn a total of 836.00 from holding Strategy Shares NewfoundReSolve or generate 34.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Strategy Shares NewfoundReSolv vs. Northern Lights
Performance |
| Timeline |
| Strategy Shares Newf |
| Northern Lights |
Strategy Shares and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Strategy Shares and Northern Lights
The main advantage of trading using opposite Strategy Shares and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strategy Shares 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.| Strategy Shares vs. Cambria Trinity ETF | Strategy Shares vs. Northern Lights | Strategy Shares vs. Cambria Global Momentum | Strategy Shares vs. Alpha Architect Value |
| Northern Lights vs. Northern Lights | Northern Lights vs. LHA Market State | Northern Lights vs. Innovator Nasdaq 100 Power | Northern Lights vs. ETF Series Solutions |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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