Correlation Between Mid Cap and Northern Lights

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Mid Cap 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 Mid Cap and Northern Lights into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mid Cap Growth and Northern Lights, you can compare the effects of market volatilities on Mid Cap 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 Mid Cap with a short position of Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and Northern Lights.

Diversification Opportunities for Mid Cap and Northern Lights

0.88
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Mid and Northern is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Growth and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and Mid Cap 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 Mid Cap Growth 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 Mid Cap i.e., Mid Cap and Northern Lights go up and down completely randomly.

Pair Corralation between Mid Cap and Northern Lights

Assuming the 90 days horizon Mid Cap Growth is expected to under-perform the Northern Lights. In addition to that, Mid Cap is 2.04 times more volatile than Northern Lights. It trades about 0.0 of its total potential returns per unit of risk. Northern Lights is currently generating about 0.01 per unit of volatility. If you would invest  2,807  in Northern Lights on December 2, 2024 and sell it today you would earn a total of  6.00  from holding Northern Lights or generate 0.21% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Mid Cap Growth  vs.  Northern Lights

 Performance 
       Timeline  
Mid Cap Growth 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Mid Cap Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.
Northern Lights 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Northern Lights has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Northern Lights is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Mid Cap and Northern Lights Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Mid Cap and Northern Lights

The main advantage of trading using opposite Mid Cap and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Cap 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 Mid Cap Growth 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..

Other Complementary Tools

Pattern Recognition
Use different Pattern Recognition models to time the market across multiple global exchanges
Alpha Finder
Use alpha and beta coefficients to find investment opportunities after accounting for the risk
Idea Breakdown
Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes
Portfolio Optimization
Compute new portfolio that will generate highest expected return given your specified tolerance for risk
Aroon Oscillator
Analyze current equity momentum using Aroon Oscillator and other momentum ratios