Correlation Between VanEck Digital and Northern Lights

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

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

Diversification Opportunities for VanEck Digital and Northern Lights

-0.58

Correlation Coefficient

VanEck Digital  Northern Lights

Excellent diversification

The 3 months correlation between VanEck and Northern is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Digital Transformation and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and VanEck Digital 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 VanEck Digital Transformation 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 VanEck Digital i.e., VanEck Digital and Northern Lights go up and down completely randomly.

Pair Corralation between VanEck Digital and Northern Lights

Given the investment horizon of 90 days VanEck Digital Transformation is expected to under-perform the Northern Lights. In addition to that, VanEck Digital is 15.33 times more volatile than Northern Lights. It trades about -0.14 of its total potential returns per unit of risk. Northern Lights is currently generating about 0.16 per unit of volatility. If you would invest  2,211  in Northern Lights on December 29, 2024 and sell it today you would earn a total of  64.00  from holding Northern Lights or generate 2.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

VanEck Digital Transformation  vs.  Northern Lights

VanEck Digital Trans

Risk-Adjusted Performance

Very Weak

Over the last 90 days VanEck Digital Transformation has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Etf's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the ETF retail investors.

Northern Lights

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Lights are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, Northern Lights is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with VanEck Digital and Northern Lights

The main advantage of trading using opposite VanEck Digital and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck Digital 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.

The idea behind VanEck Digital Transformation and Northern Lights 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.