Correlation Between SPDR Portfolio and Northern Lights
Can any of the company-specific risk be diversified away by investing in both SPDR Portfolio 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 SPDR Portfolio and Northern Lights into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR Portfolio SP and Northern Lights, you can compare the effects of market volatilities on SPDR Portfolio 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 SPDR Portfolio with a short position of Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Portfolio and Northern Lights.
Diversification Opportunities for SPDR Portfolio and Northern Lights
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between SPDR and Northern is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Portfolio SP and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and SPDR Portfolio 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 SPDR Portfolio SP 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 SPDR Portfolio i.e., SPDR Portfolio and Northern Lights go up and down completely randomly.
Pair Corralation between SPDR Portfolio and Northern Lights
Given the investment horizon of 90 days SPDR Portfolio is expected to generate 1.04 times less return on investment than Northern Lights. In addition to that, SPDR Portfolio is 1.02 times more volatile than Northern Lights. It trades about 0.3 of its total potential returns per unit of risk. Northern Lights is currently generating about 0.32 per unit of volatility. If you would invest 3,284 in Northern Lights on September 1, 2024 and sell it today you would earn a total of 217.00 from holding Northern Lights or generate 6.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
SPDR Portfolio SP vs. Northern Lights
Performance |
| Timeline |
| SPDR Portfolio SP |
| Northern Lights |
SPDR Portfolio and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR Portfolio and Northern Lights
The main advantage of trading using opposite SPDR Portfolio and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Portfolio 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.| SPDR Portfolio vs. FT Vest Equity | SPDR Portfolio vs. Northern Lights | SPDR Portfolio vs. Dimensional International High | SPDR Portfolio vs. Matthews China Discovery |
| 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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