Correlation Between Vanguard Growth and Northern Lights

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

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

Diversification Opportunities for Vanguard Growth and Northern Lights

-0.3

Correlation Coefficient

Vanguard Growth  Northern Lights

Very good diversification

The 3 months correlation between Vanguard and Northern is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Growth Index and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and Vanguard Growth 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 Vanguard Growth Index 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 Vanguard Growth i.e., Vanguard Growth and Northern Lights go up and down completely randomly.

Pair Corralation between Vanguard Growth and Northern Lights

Considering the 90-day investment horizon Vanguard Growth Index is expected to generate 4.62 times more return on investment than Northern Lights. However, Vanguard Growth is 4.62 times more volatile than Northern Lights. It trades about -0.06 of its potential returns per unit of risk. Northern Lights is currently generating about -0.26 per unit of risk. If you would invest  42,272  in Vanguard Growth Index on October 7, 2024 and sell it today you would lose (622.00) from holding Vanguard Growth Index or give up 1.47% of portfolio value over 90 days.

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

Vanguard Growth Index  vs.  Northern Lights

Vanguard Growth Index

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Growth Index are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Vanguard Growth may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 fairly strong technical indicators, Northern Lights is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Growth and Northern Lights

The main advantage of trading using opposite Vanguard Growth and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Growth 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 Vanguard Growth Index 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.

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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..