Correlation Between Global Lights and Northern Star

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

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

Diversification Opportunities for Global Lights and Northern Star

0.77

Correlation Coefficient

Global Lights  Northern Star

Poor diversification

The 3 months correlation between Global and Northern is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Global Lights Acquisition and Northern Star Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Star Investment and Global 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 Global Lights Acquisition are associated (or correlated) with Northern Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Star Investment has no effect on the direction of Global Lights i.e., Global Lights and Northern Star go up and down completely randomly.

Pair Corralation between Global Lights and Northern Star

If you would invest  1,035  in Global Lights Acquisition on October 12, 2024 and sell it today you would earn a total of  40.00  from holding Global Lights Acquisition or generate 3.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	0.53%
Values	Daily Returns

Global Lights Acquisition  vs.  Northern Star Investment

Global Lights Acquisition

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global Lights Acquisition are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Global Lights is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Northern Star Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Northern Star Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Northern Star is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Global Lights and Northern Star

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

The idea behind Global Lights Acquisition and Northern Star Investment 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.