Correlation Between SmartETFs Dividend and Northern Lights

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

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

Diversification Opportunities for SmartETFs Dividend and Northern Lights

-0.25

Correlation Coefficient

SmartETFs Dividend  Northern Lights

Very good diversification

The 3 months correlation between SmartETFs and Northern is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding SmartETFs Dividend Builder and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and SmartETFs Dividend 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 SmartETFs Dividend Builder 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 SmartETFs Dividend i.e., SmartETFs Dividend and Northern Lights go up and down completely randomly.

Pair Corralation between SmartETFs Dividend and Northern Lights

Given the investment horizon of 90 days SmartETFs Dividend Builder is expected to generate 0.73 times more return on investment than Northern Lights. However, SmartETFs Dividend Builder is 1.38 times less risky than Northern Lights. It trades about 0.06 of its potential returns per unit of risk. Northern Lights is currently generating about -0.09 per unit of risk. If you would invest  2,839  in SmartETFs Dividend Builder on December 30, 2024 and sell it today you would earn a total of  73.00  from holding SmartETFs Dividend Builder or generate 2.57% return on investment over 90 days.

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

SmartETFs Dividend Builder  vs.  Northern Lights

SmartETFs Dividend

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SmartETFs Dividend Builder are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, SmartETFs Dividend is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Northern Lights

Risk-Adjusted Performance

Very Weak

Over the last 90 days Northern Lights has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward-looking signals, Northern Lights is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with SmartETFs Dividend and Northern Lights

The main advantage of trading using opposite SmartETFs Dividend and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SmartETFs Dividend 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 SmartETFs Dividend Builder 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.