Correlation Between IREIT MarketVector and Northern Lights

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

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

Diversification Opportunities for IREIT MarketVector and Northern Lights

0.14

Correlation Coefficient

IREIT MarketVector  Northern Lights

Average diversification

The 3 months correlation between IREIT and Northern is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding iREIT MarketVector and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and IREIT MarketVector 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 iREIT MarketVector 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 IREIT MarketVector i.e., IREIT MarketVector and Northern Lights go up and down completely randomly.

Pair Corralation between IREIT MarketVector and Northern Lights

Given the investment horizon of 90 days IREIT MarketVector is expected to generate 361.72 times less return on investment than Northern Lights. But when comparing it to its historical volatility, iREIT MarketVector is 85.97 times less risky than Northern Lights. It trades about 0.02 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  0.00  in Northern Lights on October 21, 2024 and sell it today you would earn a total of  2,726  from holding Northern Lights or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	54.03%
Values	Daily Returns

iREIT MarketVector  vs.  Northern Lights

iREIT MarketVector

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iREIT MarketVector has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Northern Lights

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Lights are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward-looking signals, Northern Lights is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with IREIT MarketVector and Northern Lights

The main advantage of trading using opposite IREIT MarketVector and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IREIT MarketVector 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 iREIT MarketVector 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.