Correlation Between Vanguard Mid and Northern Lights
Can any of the company-specific risk be diversified away by investing in both Vanguard Mid 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 Vanguard Mid and Northern Lights into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Mid Cap Index and Northern Lights, you can compare the effects of market volatilities on Vanguard Mid 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 Vanguard Mid with a short position of Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Mid and Northern Lights.
Diversification Opportunities for Vanguard Mid and Northern Lights
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Northern is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Mid Cap Index and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and Vanguard Mid 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 Vanguard Mid Cap Index 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 Vanguard Mid i.e., Vanguard Mid and Northern Lights go up and down completely randomly.
Pair Corralation between Vanguard Mid and Northern Lights
Allowing for the 90-day total investment horizon Vanguard Mid Cap Index is expected to generate 2.21 times more return on investment than Northern Lights. However, Vanguard Mid is 2.21 times more volatile than Northern Lights. It trades about 0.1 of its potential returns per unit of risk. Northern Lights is currently generating about 0.1 per unit of risk. If you would invest 21,868 in Vanguard Mid Cap Index on August 29, 2024 and sell it today you would earn a total of 6,523 from holding Vanguard Mid Cap Index or generate 29.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Mid Cap Index vs. Northern Lights
Performance |
| Timeline |
| Vanguard Mid Cap |
| Northern Lights |
Vanguard Mid and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Mid and Northern Lights
The main advantage of trading using opposite Vanguard Mid and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Mid 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.| Vanguard Mid vs. Vanguard Small Cap Index | Vanguard Mid vs. Vanguard Large Cap Index | Vanguard Mid vs. Vanguard Small Cap Growth | Vanguard Mid vs. Vanguard Small Cap Value |
| Northern Lights vs. WisdomTree Interest Rate | Northern Lights vs. WisdomTree SmallCap Quality | Northern Lights vs. WisdomTree Emerging Markets | Northern Lights vs. WisdomTree Emerging Markets |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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