diversifiable risk of combining FT Cboe and Northern Lights into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FT Cboe Vest and Northern Lights, you can compare the effects of market volatilities on FT Cboe 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 FT Cboe with a short position of Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of FT Cboe and Northern Lights.
Diversification Opportunities for FT Cboe and Northern Lights
Pair Corralation between FT Cboe and Northern Lights
Given the investment horizon of 90 days FT Cboe is expected to generate 1.66 times less return on investment than Northern Lights. But when comparing it to its historical volatility, FT Cboe Vest is 2.02 times less risky than Northern Lights. It trades about 0.06 of its potential returns per unit of risk. Northern Lights is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,540 in Northern Lights on December 6, 2023 and sell it today you would earn a total of 697.00 from holding Northern Lights or generate 27.44% return on investment over 90 days.
FT Cboe Vest vs. Northern Lights
FT Cboe and Northern Lights Volatility Contrast
Pair Trading with FT Cboe and Northern LightsThe main advantage of trading using opposite FT Cboe and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FT Cboe 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 FT Cboe Vest 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 AI Investment Finder module to use AI to screen and filter profitable investment opportunities.
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