Correlation Between Northern Lights and Salient Tactical
Can any of the company-specific risk be diversified away by investing in both Northern Lights and Salient 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 Salient 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 Salient Tactical Growth, you can compare the effects of market volatilities on Northern Lights and Salient 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 Salient Tactical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Lights and Salient Tactical.
Diversification Opportunities for Northern Lights and Salient Tactical
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Northern and Salient is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and Salient Tactical Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salient Tactical Growth 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 Salient Tactical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salient Tactical Growth has no effect on the direction of Northern Lights i.e., Northern Lights and Salient Tactical go up and down completely randomly.
Pair Corralation between Northern Lights and Salient Tactical
Assuming the 90 days horizon Northern Lights is expected to generate 1.41 times more return on investment than Salient Tactical. However, Northern Lights is 1.41 times more volatile than Salient Tactical Growth. It trades about 0.39 of its potential returns per unit of risk. Salient Tactical Growth is currently generating about 0.41 per unit of risk. If you would invest 2,842 in Northern Lights on September 1, 2024 and sell it today you would earn a total of 153.00 from holding Northern Lights or generate 5.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Lights vs. Salient Tactical Growth
Performance |
| Timeline |
| Northern Lights |
| Salient Tactical Growth |
Northern Lights and Salient Tactical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Lights and Salient Tactical
The main advantage of trading using opposite Northern Lights and Salient Tactical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Lights position performs unexpectedly, Salient 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 Salient Tactical will offset losses from the drop in Salient Tactical's long position.| Northern Lights vs. Sierra Tactical Risk | Northern Lights vs. Sierra Tactical Risk | Northern Lights vs. Sierra Strategic Income | Northern Lights vs. Sierra Tactical Bond |
| Salient Tactical vs. Salient Tactical Plus | Salient Tactical vs. Salient Tactical Plus | Salient Tactical vs. Salient Tactical Plus | Salient Tactical vs. Salient Tactical Plus |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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