Correlation Between X Square and Northern Lights
Can any of the company-specific risk be diversified away by investing in both X Square 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 X Square and Northern Lights into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between X Square Balanced and Northern Lights, you can compare the effects of market volatilities on X Square 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 X Square with a short position of Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of X Square and Northern Lights.
Diversification Opportunities for X Square and Northern Lights
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between SQCBX and Northern is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding X Square Balanced and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and X Square 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 X Square Balanced 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 X Square i.e., X Square and Northern Lights go up and down completely randomly.
Pair Corralation between X Square and Northern Lights
Assuming the 90 days horizon X Square Balanced is expected to generate 0.77 times more return on investment than Northern Lights. However, X Square Balanced is 1.3 times less risky than Northern Lights. It trades about 0.36 of its potential returns per unit of risk. Northern Lights is currently generating about 0.22 per unit of risk. If you would invest 1,304 in X Square Balanced on August 30, 2024 and sell it today you would earn a total of 63.00 from holding X Square Balanced or generate 4.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
X Square Balanced vs. Northern Lights
Performance |
| Timeline |
| X Square Balanced |
| Northern Lights |
X Square and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with X Square and Northern Lights
The main advantage of trading using opposite X Square and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if X Square 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.| X Square vs. X Square Balanced | X Square vs. X Square Balanced | X Square vs. FT Vest Equity | X Square vs. Zillow Group Class |
| Northern Lights vs. iShares MSCI USA | Northern Lights vs. iShares MSCI USA | Northern Lights vs. iShares MSCI USA | Northern Lights vs. iShares Expanded Tech Software |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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