Correlation Between Northern Lights and ProShares
Can any of the company-specific risk be diversified away by investing in both Northern Lights and ProShares 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 ProShares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Lights and ProShares SP 500, you can compare the effects of market volatilities on Northern Lights and ProShares 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 ProShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Lights and ProShares.
Diversification Opportunities for Northern Lights and ProShares
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Northern and ProShares is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and ProShares SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares SP 500 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 ProShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares SP 500 has no effect on the direction of Northern Lights i.e., Northern Lights and ProShares go up and down completely randomly.
Pair Corralation between Northern Lights and ProShares
Given the investment horizon of 90 days Northern Lights is expected to generate 0.96 times more return on investment than ProShares. However, Northern Lights is 1.05 times less risky than ProShares. It trades about 0.02 of its potential returns per unit of risk. ProShares SP 500 is currently generating about -0.03 per unit of risk. If you would invest 3,224 in Northern Lights on March 16, 2024 and sell it today you would earn a total of 22.00 from holding Northern Lights or generate 0.68% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 98.41% |
Values | Daily Returns |
Northern Lights vs. ProShares SP 500
Performance |
Timeline |
Northern Lights |
ProShares SP 500 |
Northern Lights and ProShares Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Northern Lights and ProShares
The main advantage of trading using opposite Northern Lights and ProShares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Lights position performs unexpectedly, ProShares 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 ProShares will offset losses from the drop in ProShares' long position.Northern Lights vs. iShares ESG Advanced | Northern Lights vs. iShares ESG MSCI | Northern Lights vs. iShares ESG Aware | Northern Lights vs. iShares ESG USD |
ProShares vs. Northern Lights | ProShares vs. Morningstar Unconstrained Allocation | ProShares vs. Thrivent High Yield | ProShares vs. Via Renewables |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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