Correlation Between Upholdings Compound and Northern Lights

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

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

Diversification Opportunities for Upholdings Compound and Northern Lights

0.63

Correlation Coefficient

Upholdings Compound  Northern Lights

Poor diversification

The 3 months correlation between Upholdings and Northern is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Upholdings Compound Kings and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and Upholdings Compound 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 Upholdings Compound Kings 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 Upholdings Compound i.e., Upholdings Compound and Northern Lights go up and down completely randomly.

Pair Corralation between Upholdings Compound and Northern Lights

Given the investment horizon of 90 days Upholdings Compound Kings is expected to under-perform the Northern Lights. In addition to that, Upholdings Compound is 1.39 times more volatile than Northern Lights. It trades about -0.16 of its total potential returns per unit of risk. Northern Lights is currently generating about -0.15 per unit of volatility. If you would invest  2,742  in Northern Lights on February 2, 2024 and sell it today you would lose (44.00) from holding Northern Lights or give up 1.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Upholdings Compound Kings  vs.  Northern Lights

Upholdings Compound Kings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Upholdings Compound Kings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Upholdings Compound is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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 very healthy basic indicators, Northern Lights is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Upholdings Compound and Northern Lights

The main advantage of trading using opposite Upholdings Compound and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Upholdings Compound 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 Upholdings Compound Kings 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.