Correlation Between Steward Small and Northern Lights
Can any of the company-specific risk be diversified away by investing in both Steward Small 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 Steward Small and Northern Lights into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steward Small Mid Cap and Northern Lights, you can compare the effects of market volatilities on Steward Small 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 Steward Small with a short position of Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steward Small and Northern Lights.
Diversification Opportunities for Steward Small and Northern Lights
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Steward and Northern is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Steward Small 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 Steward Small 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 Steward Small 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 Steward Small i.e., Steward Small and Northern Lights go up and down completely randomly.
Pair Corralation between Steward Small and Northern Lights
Assuming the 90 days horizon Steward Small is expected to generate 1.34 times less return on investment than Northern Lights. In addition to that, Steward Small is 1.76 times more volatile than Northern Lights. It trades about 0.05 of its total potential returns per unit of risk. Northern Lights is currently generating about 0.11 per unit of volatility. If you would invest 2,462 in Northern Lights on September 1, 2024 and sell it today you would earn a total of 533.00 from holding Northern Lights or generate 21.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 64.91% |
| Values | Daily Returns |
Steward Small Mid Cap vs. Northern Lights
Performance |
| Timeline |
| Steward Small Mid |
| Northern Lights |
Steward Small and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steward Small and Northern Lights
The main advantage of trading using opposite Steward Small and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steward Small 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.| Steward Small vs. Steward Small Mid Cap | Steward Small vs. Steward Ered Call | Steward Small vs. Steward Ered Call | Steward Small vs. Steward Ered Call |
| Northern Lights vs. Sierra Tactical Risk | Northern Lights vs. Sierra Tactical Risk | Northern Lights vs. Sierra Strategic Income | Northern Lights vs. Sierra Tactical Bond |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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