Correlation Between Vanguard Large and Northern Lights
Can any of the company-specific risk be diversified away by investing in both Vanguard Large 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 Large 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 Large Cap Index and Northern Lights, you can compare the effects of market volatilities on Vanguard Large 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 Large with a short position of Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Large and Northern Lights.
Diversification Opportunities for Vanguard Large and Northern Lights
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and Northern is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Large 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 Large 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 Large 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 Large i.e., Vanguard Large and Northern Lights go up and down completely randomly.
Pair Corralation between Vanguard Large and Northern Lights
Allowing for the 90-day total investment horizon Vanguard Large Cap Index is expected to generate 1.03 times more return on investment than Northern Lights. However, Vanguard Large is 1.03 times more volatile than Northern Lights. It trades about 0.14 of its potential returns per unit of risk. Northern Lights is currently generating about 0.07 per unit of risk. If you would invest 26,329 in Vanguard Large Cap Index on August 30, 2024 and sell it today you would earn a total of 1,232 from holding Vanguard Large Cap Index or generate 4.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Large Cap Index vs. Northern Lights
Performance |
| Timeline |
| Vanguard Large Cap |
| Northern Lights |
Vanguard Large and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Large and Northern Lights
The main advantage of trading using opposite Vanguard Large and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Large 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 Large vs. Vanguard Mid Cap Index | Vanguard Large vs. Vanguard Small Cap Index | Vanguard Large vs. Vanguard Extended Market | Vanguard Large vs. Vanguard Small Cap Growth |
| 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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