Correlation Between Northern Lights and Sierra Tactical
Can any of the company-specific risk be diversified away by investing in both Northern Lights and Sierra Tactical 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 Sierra Tactical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Lights and Sierra Tactical Bond, you can compare the effects of market volatilities on Northern Lights and Sierra Tactical 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 Sierra Tactical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Lights and Sierra Tactical.
Diversification Opportunities for Northern Lights and Sierra Tactical
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Northern and Sierra is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and Sierra Tactical Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sierra Tactical Bond 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 Sierra Tactical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sierra Tactical Bond has no effect on the direction of Northern Lights i.e., Northern Lights and Sierra Tactical go up and down completely randomly.
Pair Corralation between Northern Lights and Sierra Tactical
Assuming the 90 days horizon Northern Lights is expected to generate 3.63 times more return on investment than Sierra Tactical. However, Northern Lights is 3.63 times more volatile than Sierra Tactical Bond. It trades about 0.08 of its potential returns per unit of risk. Sierra Tactical Bond is currently generating about 0.23 per unit of risk. If you would invest 2,796 in Northern Lights on August 29, 2024 and sell it today you would earn a total of 201.00 from holding Northern Lights or generate 7.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Lights vs. Sierra Tactical Bond
Performance |
| Timeline |
| Northern Lights |
| Sierra Tactical Bond |
Northern Lights and Sierra Tactical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Lights and Sierra Tactical
The main advantage of trading using opposite Northern Lights and Sierra Tactical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Lights position performs unexpectedly, Sierra Tactical 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 Sierra Tactical will offset losses from the drop in Sierra Tactical's long position.| Northern Lights vs. All Asset Fund | Northern Lights vs. HUMANA INC | Northern Lights vs. Aquagold International | Northern Lights vs. Barloworld Ltd ADR |
| Sierra Tactical vs. HUMANA INC | Sierra Tactical vs. Aquagold International | Sierra Tactical vs. Barloworld Ltd ADR | Sierra Tactical vs. Morningstar Unconstrained Allocation |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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