Correlation Between Northern Lights and US Commodity

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

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

Diversification Opportunities for Northern Lights and US Commodity

0.0

Correlation Coefficient

Northern Lights  US Commodity

Pay attention - limited upside

The 3 months correlation between Northern and ALUM is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and US Commodity Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Commodity Funds and Northern 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 Northern Lights are associated (or correlated) with US Commodity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Commodity Funds has no effect on the direction of Northern Lights i.e., Northern Lights and US Commodity go up and down completely randomly.

Pair Corralation between Northern Lights and US Commodity

If you would invest (100.00) in US Commodity Funds on December 28, 2024 and sell it today you would earn a total of  100.00  from holding US Commodity Funds or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Northern Lights  vs.  US Commodity Funds

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. In spite of rather sound fundamental indicators, Northern Lights is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

US Commodity Funds

Risk-Adjusted Performance

Very Weak

Over the last 90 days US Commodity Funds has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, US Commodity is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Northern Lights and US Commodity

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

The idea behind Northern Lights and US Commodity Funds 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.