Correlation Between ZEGA Buy and Northern Lights
Can any of the company-specific risk be diversified away by investing in both ZEGA Buy 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 ZEGA Buy and Northern Lights into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ZEGA Buy and and Northern Lights, you can compare the effects of market volatilities on ZEGA Buy 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 ZEGA Buy with a short position of Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of ZEGA Buy and Northern Lights.
Diversification Opportunities for ZEGA Buy and Northern Lights
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ZEGA and Northern is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding ZEGA Buy and and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and ZEGA Buy 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 ZEGA Buy and 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 ZEGA Buy i.e., ZEGA Buy and Northern Lights go up and down completely randomly.
Pair Corralation between ZEGA Buy and Northern Lights
Given the investment horizon of 90 days ZEGA Buy is expected to generate 1.27 times less return on investment than Northern Lights. But when comparing it to its historical volatility, ZEGA Buy and is 1.21 times less risky than Northern Lights. It trades about 0.09 of its potential returns per unit of risk. Northern Lights is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,480 in Northern Lights on October 21, 2024 and sell it today you would earn a total of 995.00 from holding Northern Lights or generate 40.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ZEGA Buy and vs. Northern Lights
Performance |
| Timeline |
| ZEGA Buy |
| Northern Lights |
ZEGA Buy and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ZEGA Buy and Northern Lights
The main advantage of trading using opposite ZEGA Buy and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ZEGA Buy 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.| ZEGA Buy vs. Acruence Active Hedge | ZEGA Buy vs. Innovator Equity Accelerated | ZEGA Buy vs. Innovator Growth 100 Accelerated | ZEGA Buy vs. AdvisorShares STAR Global |
| 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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