Correlation Between Northern Lights and Harbor Disruptive

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

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

Diversification Opportunities for Northern Lights and Harbor Disruptive

0.08

Correlation Coefficient

Northern Lights  Harbor Disruptive

Significant diversification

The 3 months correlation between Northern and Harbor is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and Harbor Disruptive Innovation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harbor Disruptive 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 Harbor Disruptive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harbor Disruptive has no effect on the direction of Northern Lights i.e., Northern Lights and Harbor Disruptive go up and down completely randomly.

Pair Corralation between Northern Lights and Harbor Disruptive

Given the investment horizon of 90 days Northern Lights is expected to under-perform the Harbor Disruptive. In addition to that, Northern Lights is 4.42 times more volatile than Harbor Disruptive Innovation. It trades about -0.26 of its total potential returns per unit of risk. Harbor Disruptive Innovation is currently generating about 0.46 per unit of volatility. If you would invest  1,759  in Harbor Disruptive Innovation on October 12, 2024 and sell it today you would earn a total of  13.00  from holding Harbor Disruptive Innovation or generate 0.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	40.0%
Values	Daily Returns

Northern Lights  vs.  Harbor Disruptive Innovation

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.

Harbor Disruptive

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Harbor Disruptive Innovation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very unsteady basic indicators, Harbor Disruptive may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Northern Lights and Harbor Disruptive

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

The idea behind Northern Lights and Harbor Disruptive Innovation 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.