Correlation Between Northern Lights and TrueShares Active
Can any of the company-specific risk be diversified away by investing in both Northern Lights and TrueShares Active 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 TrueShares Active into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Lights and TrueShares Active Yield, you can compare the effects of market volatilities on Northern Lights and TrueShares Active 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 TrueShares Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Lights and TrueShares Active.
Diversification Opportunities for Northern Lights and TrueShares Active
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Northern and TrueShares is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and TrueShares Active Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TrueShares Active Yield 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 TrueShares Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TrueShares Active Yield has no effect on the direction of Northern Lights i.e., Northern Lights and TrueShares Active go up and down completely randomly.
Pair Corralation between Northern Lights and TrueShares Active
Considering the 90-day investment horizon Northern Lights is expected to generate 1.63 times less return on investment than TrueShares Active. But when comparing it to its historical volatility, Northern Lights is 2.08 times less risky than TrueShares Active. It trades about 0.07 of its potential returns per unit of risk. TrueShares Active Yield is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,344 in TrueShares Active Yield on September 14, 2024 and sell it today you would earn a total of 119.00 from holding TrueShares Active Yield or generate 5.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 31.92% |
| Values | Daily Returns |
Northern Lights vs. TrueShares Active Yield
Performance |
| Timeline |
| Northern Lights |
| TrueShares Active Yield |
Northern Lights and TrueShares Active Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Lights and TrueShares Active
The main advantage of trading using opposite Northern Lights and TrueShares Active positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Lights position performs unexpectedly, TrueShares Active 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 TrueShares Active will offset losses from the drop in TrueShares Active's long position.| Northern Lights vs. Northern Lights | Northern Lights vs. Innovator 20 Year | Northern Lights vs. Strategy Shares NewfoundReSolve | Northern Lights vs. Innovator SP 500 |
| TrueShares Active vs. Cambria Trinity ETF | TrueShares Active vs. Northern Lights | TrueShares Active vs. Cambria Global Momentum | TrueShares Active vs. Alpha Architect Value |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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