Correlation Between State Street and Northern Lights

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

By analyzing existing cross correlation between State Street and Northern Lights, you can compare the effects of market volatilities on State Street and Northern Lights 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 State Street with a short position of Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and Northern Lights.

Diversification Opportunities for State Street and Northern Lights

0.0

Correlation Coefficient

State Street  Northern Lights

Pay attention - limited upside

The 3 months correlation between State and Northern is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding State Street and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and State Street 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 State Street are associated (or correlated) with Northern Lights. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Lights has no effect on the direction of State Street i.e., State Street and Northern Lights go up and down completely randomly.

Pair Corralation between State Street and Northern Lights

If you would invest  2,520  in Northern Lights on October 23, 2024 and sell it today you would earn a total of  974.00  from holding Northern Lights or generate 38.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

State Street  vs.  Northern Lights

State Street

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days State Street has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, State Street is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

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.

Pair Trading with State Street and Northern Lights

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

The idea behind State Street and Northern Lights 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.