Correlation Between Northern Lights and Exchange Listed

Can any of the company-specific risk be diversified away by investing in both Northern Lights and Exchange Listed 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 Northern Lights and Exchange Listed into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Northern Lights and Exchange Listed Funds, you can compare the effects of market volatilities on Northern Lights and Exchange Listed 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 Northern Lights with a short position of Exchange Listed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Lights and Exchange Listed.

Diversification Opportunities for Northern Lights and Exchange Listed

0.83

Correlation Coefficient

Northern Lights  Exchange Listed

Very poor diversification

The 3 months correlation between Northern and Exchange is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and Exchange Listed Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exchange Listed Funds and Northern Lights 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 Northern Lights are associated (or correlated) with Exchange Listed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exchange Listed Funds has no effect on the direction of Northern Lights i.e., Northern Lights and Exchange Listed go up and down completely randomly.

Pair Corralation between Northern Lights and Exchange Listed

Given the investment horizon of 90 days Northern Lights is expected to generate 1.4 times more return on investment than Exchange Listed. However, Northern Lights is 1.4 times more volatile than Exchange Listed Funds. It trades about 0.09 of its potential returns per unit of risk. Exchange Listed Funds is currently generating about 0.07 per unit of risk. If you would invest  3,119  in Northern Lights on September 29, 2024 and sell it today you would earn a total of  379.00  from holding Northern Lights or generate 12.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Northern Lights  vs.  Exchange Listed Funds

Northern Lights

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Lights are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Northern Lights is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Exchange Listed Funds

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Exchange Listed Funds has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Exchange Listed is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Northern Lights and Exchange Listed

The main advantage of trading using opposite Northern Lights and Exchange Listed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Lights position performs unexpectedly, Exchange Listed 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 Exchange Listed will offset losses from the drop in Exchange Listed's long position.

The idea behind Northern Lights and Exchange Listed Funds pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.