Correlation Between Xtrackers MSCI and Northern Lights
Can any of the company-specific risk be diversified away by investing in both Xtrackers MSCI and Northern Lights 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 Xtrackers MSCI and Northern Lights into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xtrackers MSCI USA and Northern Lights, you can compare the effects of market volatilities on Xtrackers MSCI and Northern Lights 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 Xtrackers MSCI with a short position of Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers MSCI and Northern Lights.
Diversification Opportunities for Xtrackers MSCI and Northern Lights
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Xtrackers and Northern is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers MSCI USA and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and Xtrackers MSCI 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 Xtrackers MSCI USA are associated (or correlated) with Northern Lights. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Lights has no effect on the direction of Xtrackers MSCI i.e., Xtrackers MSCI and Northern Lights go up and down completely randomly.
Pair Corralation between Xtrackers MSCI and Northern Lights
Given the investment horizon of 90 days Xtrackers MSCI USA is expected to generate 0.94 times more return on investment than Northern Lights. However, Xtrackers MSCI USA is 1.06 times less risky than Northern Lights. It trades about 0.11 of its potential returns per unit of risk. Northern Lights is currently generating about 0.07 per unit of risk. If you would invest 3,535 in Xtrackers MSCI USA on November 9, 2024 and sell it today you would earn a total of 1,972 from holding Xtrackers MSCI USA or generate 55.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 44.42% |
| Values | Daily Returns |
Xtrackers MSCI USA vs. Northern Lights
Performance |
| Timeline |
| Xtrackers MSCI USA |
| Northern Lights |
Xtrackers MSCI and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Xtrackers MSCI and Northern Lights
The main advantage of trading using opposite Xtrackers MSCI and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers MSCI position performs unexpectedly, Northern Lights 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 Northern Lights will offset losses from the drop in Northern Lights' long position.| Xtrackers MSCI vs. iShares ESG MSCI | Xtrackers MSCI vs. Xtrackers SP 500 | Xtrackers MSCI vs. iShares MSCI USA | Xtrackers MSCI vs. Vanguard ESG International |
| Northern Lights vs. Freedom Day Dividend | Northern Lights vs. Franklin Templeton ETF | Northern Lights vs. iShares MSCI China | Northern Lights vs. Tidal Trust II |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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