Correlation Between IShares ESG and Northern Lights
Can any of the company-specific risk be diversified away by investing in both IShares ESG 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 IShares ESG and Northern Lights into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares ESG Advanced and Northern Lights, you can compare the effects of market volatilities on IShares ESG 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 IShares ESG with a short position of Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares ESG and Northern Lights.
Diversification Opportunities for IShares ESG and Northern Lights
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and Northern is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding iShares ESG Advanced and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and IShares ESG 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 iShares ESG Advanced 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 IShares ESG i.e., IShares ESG and Northern Lights go up and down completely randomly.
Pair Corralation between IShares ESG and Northern Lights
Given the investment horizon of 90 days IShares ESG is expected to generate 1.09 times less return on investment than Northern Lights. In addition to that, IShares ESG is 1.46 times more volatile than Northern Lights. It trades about 0.06 of its total potential returns per unit of risk. Northern Lights is currently generating about 0.1 per unit of volatility. If you would invest 3,281 in Northern Lights on September 13, 2024 and sell it today you would earn a total of 337.01 from holding Northern Lights or generate 10.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares ESG Advanced vs. Northern Lights
Performance |
| Timeline |
| iShares ESG Advanced |
| Northern Lights |
IShares ESG and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares ESG and Northern Lights
The main advantage of trading using opposite IShares ESG and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares ESG 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.| IShares ESG vs. iShares Factors Growth | IShares ESG vs. Absolute Core Strategy | IShares ESG vs. PIMCO RAFI Dynamic |
| Northern Lights vs. Sterling Capital Focus | Northern Lights vs. Northern Lights | Northern Lights vs. First Trust Exchange Traded | Northern Lights vs. Northern Lights |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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