Correlation Between Northern Lights and THE RESTAURANT

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

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

Diversification Opportunities for Northern Lights and THE RESTAURANT

0.0

Correlation Coefficient

Northern Lights  THE RESTAURANT

Pay attention - limited upside

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

Pair Corralation between Northern Lights and THE RESTAURANT

If you would invest  2,834  in Northern Lights on September 4, 2024 and sell it today you would earn a total of  772.00  from holding Northern Lights or generate 27.24% return on investment over 90 days.

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

Northern Lights  vs.  THE RESTAURANT ETF

Northern Lights

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Lights are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, Northern Lights may actually be approaching a critical reversion point that can send shares even higher in January 2025.

THE RESTAURANT ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days THE RESTAURANT ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, THE RESTAURANT is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Northern Lights and THE RESTAURANT

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

The idea behind Northern Lights and THE RESTAURANT 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.

Check out your portfolio center.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.