Correlation Between Northern Lights and DoubleLine Shiller

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

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

Diversification Opportunities for Northern Lights and DoubleLine Shiller

0.88

Correlation Coefficient

Northern Lights  DoubleLine Shiller

Very poor diversification

The 3 months correlation between Northern and DoubleLine is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and DoubleLine Shiller CAPE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DoubleLine Shiller CAPE 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 DoubleLine Shiller. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DoubleLine Shiller CAPE has no effect on the direction of Northern Lights i.e., Northern Lights and DoubleLine Shiller go up and down completely randomly.

Pair Corralation between Northern Lights and DoubleLine Shiller

Given the investment horizon of 90 days Northern Lights is expected to generate 1.17 times more return on investment than DoubleLine Shiller. However, Northern Lights is 1.17 times more volatile than DoubleLine Shiller CAPE. It trades about -0.12 of its potential returns per unit of risk. DoubleLine Shiller CAPE is currently generating about -0.33 per unit of risk. If you would invest  3,566  in Northern Lights on September 24, 2024 and sell it today you would lose (80.00) from holding Northern Lights or give up 2.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Northern Lights  vs.  DoubleLine Shiller CAPE

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. 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.

DoubleLine Shiller CAPE

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DoubleLine Shiller CAPE are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, DoubleLine Shiller is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Northern Lights and DoubleLine Shiller

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

The idea behind Northern Lights and DoubleLine Shiller CAPE 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.