Correlation Between Northern Lights and EnGene Holdings

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

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

Diversification Opportunities for Northern Lights and EnGene Holdings

0.21

Correlation Coefficient

Northern Lights  EnGene Holdings

Modest diversification

The 3 months correlation between Northern and EnGene is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and enGene Holdings Common in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on enGene Holdings Common 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 EnGene Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of enGene Holdings Common has no effect on the direction of Northern Lights i.e., Northern Lights and EnGene Holdings go up and down completely randomly.

Pair Corralation between Northern Lights and EnGene Holdings

Given the investment horizon of 90 days Northern Lights is expected to generate 0.09 times more return on investment than EnGene Holdings. However, Northern Lights is 11.47 times less risky than EnGene Holdings. It trades about -0.06 of its potential returns per unit of risk. enGene Holdings Common is currently generating about -0.06 per unit of risk. If you would invest  3,518  in Northern Lights on September 20, 2024 and sell it today you would lose (79.00) from holding Northern Lights or give up 2.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.67%
Values	Daily Returns

Northern Lights  vs.  enGene Holdings Common

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.

enGene Holdings Common

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in enGene Holdings Common are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, EnGene Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Northern Lights and EnGene Holdings

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

The idea behind Northern Lights and enGene Holdings Common 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.