Correlation Between Northern Lights and PGIM ETF

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

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

Diversification Opportunities for Northern Lights and PGIM ETF

0.41

Correlation Coefficient

Northern Lights  PGIM ETF

Very weak diversification

The 3 months correlation between Northern and PGIM is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and PGIM ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PGIM ETF Trust 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 PGIM ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PGIM ETF Trust has no effect on the direction of Northern Lights i.e., Northern Lights and PGIM ETF go up and down completely randomly.

Pair Corralation between Northern Lights and PGIM ETF

Given the investment horizon of 90 days Northern Lights is expected to generate 0.66 times more return on investment than PGIM ETF. However, Northern Lights is 1.5 times less risky than PGIM ETF. It trades about 0.05 of its potential returns per unit of risk. PGIM ETF Trust is currently generating about -0.06 per unit of risk. If you would invest  2,864  in Northern Lights on December 28, 2024 and sell it today you would earn a total of  35.00  from holding Northern Lights or generate 1.22% return on investment over 90 days.

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

Northern Lights  vs.  PGIM ETF Trust

Northern Lights

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Lights are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Northern Lights is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

PGIM ETF Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days PGIM ETF Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, PGIM ETF is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Northern Lights and PGIM ETF

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

The idea behind Northern Lights and PGIM ETF Trust 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.