Correlation Between Northern Lights and VanEck Vectors

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

Diversification Opportunities for Northern Lights and VanEck Vectors

0.63
  Correlation Coefficient

Poor diversification

The 3 months correlation between Northern and VanEck is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and VanEck Vectors Moodys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Vectors Moodys 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 VanEck Vectors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Vectors Moodys has no effect on the direction of Northern Lights i.e., Northern Lights and VanEck Vectors go up and down completely randomly.

Pair Corralation between Northern Lights and VanEck Vectors

Given the investment horizon of 90 days Northern Lights is expected to generate 2.07 times more return on investment than VanEck Vectors. However, Northern Lights is 2.07 times more volatile than VanEck Vectors Moodys. It trades about 0.05 of its potential returns per unit of risk. VanEck Vectors Moodys is currently generating about -0.1 per unit of risk. If you would invest  2,520  in Northern Lights on March 10, 2023 and sell it today you would earn a total of  43.00  from holding Northern Lights or generate 1.71% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Northern Lights  vs.  VanEck Vectors Moodys

 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.
VanEck Vectors Moodys 

VanEck Performance

1 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Vectors Moodys are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, VanEck Vectors is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Northern Lights and VanEck Vectors Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Northern Lights and VanEck Vectors

The main advantage of trading using opposite Northern Lights and VanEck Vectors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Lights position performs unexpectedly, VanEck Vectors 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 VanEck Vectors will offset losses from the drop in VanEck Vectors' long position.
The idea behind Northern Lights and VanEck Vectors Moodys 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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