Correlation Between Northern Lights and Stance Sustainable

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

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

Diversification Opportunities for Northern Lights and Stance Sustainable

0.48

Correlation Coefficient

Northern Lights  Stance Sustainable

Very weak diversification

The 3 months correlation between Northern and Stance is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and Stance Sustainable Beta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stance Sustainable Beta 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 Stance Sustainable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stance Sustainable Beta has no effect on the direction of Northern Lights i.e., Northern Lights and Stance Sustainable go up and down completely randomly.

Pair Corralation between Northern Lights and Stance Sustainable

Given the investment horizon of 90 days Northern Lights is expected to generate 2.01 times less return on investment than Stance Sustainable. In addition to that, Northern Lights is 1.09 times more volatile than Stance Sustainable Beta. It trades about 0.09 of its total potential returns per unit of risk. Stance Sustainable Beta is currently generating about 0.19 per unit of volatility. If you would invest  2,483  in Stance Sustainable Beta on September 17, 2024 and sell it today you would earn a total of  58.00  from holding Stance Sustainable Beta or generate 2.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	32.31%
Values	Daily Returns

Northern Lights  vs.  Stance Sustainable Beta

Northern Lights

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Lights are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. 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.

Stance Sustainable Beta

Risk-Adjusted Performance

14 of 100

Good

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

Pair Trading with Northern Lights and Stance Sustainable

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

The idea behind Northern Lights and Stance Sustainable Beta 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.