Correlation Between Northern Lights and UGLD

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

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

Diversification Opportunities for Northern Lights and UGLD

0.0

Correlation Coefficient

Northern Lights  UGLD

Pay attention - limited upside

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

Pair Corralation between Northern Lights and UGLD

If you would invest  20,136  in UGLD on January 28, 2024 and sell it today you would earn a total of  0.00  from holding UGLD or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	4.76%
Values	Daily Returns

Northern Lights  vs.  UGLD

Northern Lights

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Lights are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Northern Lights is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

UGLD

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Northern Lights and UGLD

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

The idea behind Northern Lights and UGLD 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.