Correlation Between Northern Lights and INY

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

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

Diversification Opportunities for Northern Lights and INY

0.0

Correlation Coefficient

Northern Lights  INY

Pay attention - limited upside

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

Pair Corralation between Northern Lights and INY

If you would invest  3,234  in Northern Lights on March 14, 2024 and sell it today you would earn a total of  3.00  from holding Northern Lights or generate 0.09% return on investment over 90 days.

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

Northern Lights  vs.  INY

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.

INY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, INY is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Northern Lights and INY

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

The idea behind Northern Lights and INY 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.