Correlation Between Vanguard Growth and Northern Lights
Can any of the company-specific risk be diversified away by investing in both Vanguard Growth 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 Growth 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 Growth Index and Northern Lights, you can compare the effects of market volatilities on Vanguard Growth 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 Growth with a short position of Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Growth and Northern Lights.
Diversification Opportunities for Vanguard Growth and Northern Lights
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and Northern is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Growth 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 Growth 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 Growth 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 Growth i.e., Vanguard Growth and Northern Lights go up and down completely randomly.
Pair Corralation between Vanguard Growth and Northern Lights
Considering the 90-day investment horizon Vanguard Growth is expected to generate 1.02 times less return on investment than Northern Lights. In addition to that, Vanguard Growth is 1.09 times more volatile than Northern Lights. It trades about 0.15 of its total potential returns per unit of risk. Northern Lights is currently generating about 0.17 per unit of volatility. If you would invest 3,362 in Northern Lights on August 29, 2024 and sell it today you would earn a total of 131.00 from holding Northern Lights or generate 3.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Growth Index vs. Northern Lights
Performance |
| Timeline |
| Vanguard Growth Index |
| Northern Lights |
Vanguard Growth and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Growth and Northern Lights
The main advantage of trading using opposite Vanguard Growth and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Growth 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 Growth vs. Vanguard Value Index | Vanguard Growth vs. Vanguard Information Technology | Vanguard Growth vs. Vanguard Small Cap Growth | Vanguard Growth vs. Vanguard Dividend Appreciation |
| Northern Lights vs. Davis Select International | Northern Lights vs. Tidal ETF Trust | Northern Lights vs. Principal Value ETF | 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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