Correlation Between Vanguard High and Northern Lights
Can any of the company-specific risk be diversified away by investing in both Vanguard High 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 High 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 High Dividend and Northern Lights, you can compare the effects of market volatilities on Vanguard High 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 High with a short position of Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard High and Northern Lights.
Diversification Opportunities for Vanguard High 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 High Dividend and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and Vanguard High 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 High Dividend 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 High i.e., Vanguard High and Northern Lights go up and down completely randomly.
Pair Corralation between Vanguard High and Northern Lights
Considering the 90-day investment horizon Vanguard High Dividend is expected to under-perform the Northern Lights. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard High Dividend is 1.27 times less risky than Northern Lights. The etf trades about -0.1 of its potential returns per unit of risk. The Northern Lights is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 3,467 in Northern Lights on September 12, 2024 and sell it today you would earn a total of 1.00 from holding Northern Lights or generate 0.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard High Dividend vs. Northern Lights
Performance |
| Timeline |
| Vanguard High Dividend |
| Northern Lights |
Vanguard High and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard High and Northern Lights
The main advantage of trading using opposite Vanguard High and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard High 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 High vs. Vanguard Dividend Appreciation | Vanguard High vs. Schwab Dividend Equity | Vanguard High vs. Vanguard Real Estate | Vanguard High vs. Vanguard Total Stock |
| Northern Lights vs. Vanguard SP 500 | Northern Lights vs. Vanguard Real Estate | Northern Lights vs. Vanguard Total Bond | Northern Lights vs. Vanguard High Dividend |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
Other Complementary Tools
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios |