Correlation Between Northern Lights and First Trust
Can any of the company-specific risk be diversified away by investing in both Northern Lights and First Trust 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 First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Lights and First Trust Senior, you can compare the effects of market volatilities on Northern Lights and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Lights and First Trust.
Diversification Opportunities for Northern Lights and First Trust
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Northern and First is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and First Trust Senior in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Senior 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Senior has no effect on the direction of Northern Lights i.e., Northern Lights and First Trust go up and down completely randomly.
Pair Corralation between Northern Lights and First Trust
Considering the 90-day investment horizon Northern Lights is expected to generate 1.78 times less return on investment than First Trust. In addition to that, Northern Lights is 1.1 times more volatile than First Trust Senior. It trades about 0.09 of its total potential returns per unit of risk. First Trust Senior is currently generating about 0.17 per unit of volatility. If you would invest 4,599 in First Trust Senior on August 30, 2024 and sell it today you would earn a total of 29.00 from holding First Trust Senior or generate 0.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Lights vs. First Trust Senior
Performance |
| Timeline |
| Northern Lights |
| First Trust Senior |
Northern Lights and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Lights and First Trust
The main advantage of trading using opposite Northern Lights and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Lights position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust'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 |
| First Trust vs. First Trust Tactical | First Trust vs. First Trust Low | First Trust vs. First Trust Enhanced | First Trust vs. First Trust Managed |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
Other Complementary Tools
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets |