Correlation Between Northern Lights and BZDYF

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Can any of the company-specific risk be diversified away by investing in both Northern Lights and BZDYF 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 BZDYF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Lights and BZDYF, you can compare the effects of market volatilities on Northern Lights and BZDYF 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 BZDYF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Lights and BZDYF.

Diversification Opportunities for Northern Lights and BZDYF

0.09
  Correlation Coefficient

Significant diversification

The 3 months correlation between Northern and BZDYF is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and BZDYF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BZDYF 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 BZDYF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BZDYF has no effect on the direction of Northern Lights i.e., Northern Lights and BZDYF go up and down completely randomly.

Pair Corralation between Northern Lights and BZDYF

Given the investment horizon of 90 days Northern Lights is expected to generate 1.22 times more return on investment than BZDYF. However, Northern Lights is 1.22 times more volatile than BZDYF. It trades about 0.06 of its potential returns per unit of risk. BZDYF is currently generating about -0.09 per unit of risk. If you would invest  2,416  in Northern Lights on March 10, 2023 and sell it today you would earn a total of  147.00  from holding Northern Lights or generate 6.08% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy17.21%
ValuesDaily Returns

Northern Lights  vs.  BZDYF

 Performance (%) 
       Timeline  
Northern Lights 

Northern Performance

12 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Lights are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Northern Lights may actually be approaching a critical reversion point that can send shares even higher in July 2023.
BZDYF 

BZDYF Performance

0 of 100

Over the last 90 days BZDYF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, BZDYF may actually be approaching a critical reversion point that can send shares even higher in July 2023.

Northern Lights and BZDYF Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Northern Lights and BZDYF

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

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