Correlation Between Northern Lights and All Asset
Can any of the company-specific risk be diversified away by investing in both Northern Lights and All Asset 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 Northern Lights and All Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Lights and All Asset Fund, you can compare the effects of market volatilities on Northern Lights and All Asset 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 Northern Lights with a short position of All Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Lights and All Asset.
Diversification Opportunities for Northern Lights and All Asset
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Northern and All is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and All Asset Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on All Asset Fund and Northern Lights 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 Northern Lights are associated (or correlated) with All Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of All Asset Fund has no effect on the direction of Northern Lights i.e., Northern Lights and All Asset go up and down completely randomly.
Pair Corralation between Northern Lights and All Asset
Assuming the 90 days horizon Northern Lights is expected to generate 2.0 times more return on investment than All Asset. However, Northern Lights is 2.0 times more volatile than All Asset Fund. It trades about 0.09 of its potential returns per unit of risk. All Asset Fund is currently generating about 0.11 per unit of risk. If you would invest 2,796 in Northern Lights on September 1, 2024 and sell it today you would earn a total of 208.00 from holding Northern Lights or generate 7.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Northern Lights vs. All Asset Fund
Performance |
| Timeline |
| Northern Lights |
| All Asset Fund |
Northern Lights and All Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Lights and All Asset
The main advantage of trading using opposite Northern Lights and All Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Lights position performs unexpectedly, All Asset 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 All Asset will offset losses from the drop in All Asset's long position.| Northern Lights vs. Us Strategic Equity | Northern Lights vs. Cutler Equity | Northern Lights vs. Us Vector Equity | Northern Lights vs. Artisan Select Equity |
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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