Correlation Between Northern Lights and THE HILLMAN

Can any of the company-specific risk be diversified away by investing in both Northern Lights and THE HILLMAN 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 HILLMAN 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 HILLMAN FUND, you can compare the effects of market volatilities on Northern Lights and THE HILLMAN 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 HILLMAN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Lights and THE HILLMAN.

Diversification Opportunities for Northern Lights and THE HILLMAN

0.11

Correlation Coefficient

Northern Lights  THE HILLMAN

Average diversification

The 3 months correlation between Northern and THE is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and THE HILLMAN FUND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on THE HILLMAN FUND 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 HILLMAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of THE HILLMAN FUND has no effect on the direction of Northern Lights i.e., Northern Lights and THE HILLMAN go up and down completely randomly.

Pair Corralation between Northern Lights and THE HILLMAN

Given the investment horizon of 90 days Northern Lights is expected to under-perform the THE HILLMAN. In addition to that, Northern Lights is 1.16 times more volatile than THE HILLMAN FUND. It trades about -0.02 of its total potential returns per unit of risk. THE HILLMAN FUND is currently generating about 0.0 per unit of volatility. If you would invest  2,789  in THE HILLMAN FUND on December 29, 2024 and sell it today you would earn a total of  1.00  from holding THE HILLMAN FUND or generate 0.04% return on investment over 90 days.

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

Northern Lights  vs.  THE HILLMAN FUND

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.

THE HILLMAN FUND

Risk-Adjusted Performance

Very Weak

Over the last 90 days THE HILLMAN FUND has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, THE HILLMAN is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Northern Lights and THE HILLMAN

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

The idea behind Northern Lights and THE HILLMAN FUND 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.