Correlation Between Issachar Fund and Northern Lights

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

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

Diversification Opportunities for Issachar Fund and Northern Lights

0.54

Correlation Coefficient

Issachar Fund  Northern Lights

Very weak diversification

The 3 months correlation between Issachar and Northern is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Issachar Fund Class and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and Issachar Fund 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 Issachar Fund Class 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 Issachar Fund i.e., Issachar Fund and Northern Lights go up and down completely randomly.

Pair Corralation between Issachar Fund and Northern Lights

Assuming the 90 days horizon Issachar Fund is expected to generate 16.43 times less return on investment than Northern Lights. But when comparing it to its historical volatility, Issachar Fund Class is 1.31 times less risky than Northern Lights. It trades about 0.0 of its potential returns per unit of risk. Northern Lights is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3,227  in Northern Lights on September 29, 2024 and sell it today you would earn a total of  702.00  from holding Northern Lights or generate 21.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.79%
Values	Daily Returns

Issachar Fund Class  vs.  Northern Lights

Issachar Fund Class

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Issachar Fund Class are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Issachar Fund may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Northern Lights

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Northern Lights has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, Northern Lights is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Issachar Fund and Northern Lights

The main advantage of trading using opposite Issachar Fund and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Issachar Fund 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 Issachar Fund Class 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.