Correlation Between DEUTSCHE MID and Northern Lights
Can any of the company-specific risk be diversified away by investing in both DEUTSCHE MID 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 DEUTSCHE MID and Northern Lights into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DEUTSCHE MID CAP and Northern Lights, you can compare the effects of market volatilities on DEUTSCHE MID 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 DEUTSCHE MID with a short position of Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of DEUTSCHE MID and Northern Lights.
Diversification Opportunities for DEUTSCHE MID and Northern Lights
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between DEUTSCHE and Northern is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding DEUTSCHE MID CAP and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and DEUTSCHE MID 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 DEUTSCHE MID CAP 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 DEUTSCHE MID i.e., DEUTSCHE MID and Northern Lights go up and down completely randomly.
Pair Corralation between DEUTSCHE MID and Northern Lights
Assuming the 90 days horizon DEUTSCHE MID is expected to generate 3.75 times less return on investment than Northern Lights. But when comparing it to its historical volatility, DEUTSCHE MID CAP is 2.93 times less risky than Northern Lights. It trades about 0.08 of its potential returns per unit of risk. Northern Lights is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,404 in Northern Lights on August 24, 2024 and sell it today you would earn a total of 1,159 from holding Northern Lights or generate 48.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
DEUTSCHE MID CAP vs. Northern Lights
Performance |
| Timeline |
| DEUTSCHE MID CAP |
| Northern Lights |
DEUTSCHE MID and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DEUTSCHE MID and Northern Lights
The main advantage of trading using opposite DEUTSCHE MID and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DEUTSCHE MID 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.| DEUTSCHE MID vs. DEUTSCHE MID CAP | DEUTSCHE MID vs. FT Vest Equity | DEUTSCHE MID vs. Zillow Group Class | DEUTSCHE MID vs. Northern Lights |
| 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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