Correlation Between Northern Lights and Alger 35

Can any of the company-specific risk be diversified away by investing in both Northern Lights and Alger 35 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 Alger 35 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Northern Lights and Alger 35 ETF, you can compare the effects of market volatilities on Northern Lights and Alger 35 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 Alger 35. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Lights and Alger 35.

Diversification Opportunities for Northern Lights and Alger 35

0.29

Correlation Coefficient

Northern Lights  Alger 35

Modest diversification

The 3 months correlation between Northern and Alger is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and Alger 35 ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger 35 ETF 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 Alger 35. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger 35 ETF has no effect on the direction of Northern Lights i.e., Northern Lights and Alger 35 go up and down completely randomly.

Pair Corralation between Northern Lights and Alger 35

Given the investment horizon of 90 days Northern Lights is expected to generate 0.4 times more return on investment than Alger 35. However, Northern Lights is 2.52 times less risky than Alger 35. It trades about 0.0 of its potential returns per unit of risk. Alger 35 ETF is currently generating about 0.0 per unit of risk. If you would invest  3,595  in Northern Lights on November 28, 2024 and sell it today you would lose (10.00) from holding Northern Lights or give up 0.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Northern Lights  vs.  Alger 35 ETF

Northern Lights

Risk-Adjusted Performance

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.

Alger 35 ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alger 35 ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Alger 35 is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Northern Lights and Alger 35

The main advantage of trading using opposite Northern Lights and Alger 35 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Lights position performs unexpectedly, Alger 35 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 Alger 35 will offset losses from the drop in Alger 35's long position.

The idea behind Northern Lights and Alger 35 ETF 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..