Correlation Between Northern Lights and AdvisorShares Gerber

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

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

Diversification Opportunities for Northern Lights and AdvisorShares Gerber

0.74

Correlation Coefficient

Northern Lights  AdvisorShares Gerber

Poor diversification

The 3 months correlation between Northern and AdvisorShares is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and AdvisorShares Gerber Kawasaki in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AdvisorShares Gerber 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 AdvisorShares Gerber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AdvisorShares Gerber has no effect on the direction of Northern Lights i.e., Northern Lights and AdvisorShares Gerber go up and down completely randomly.

Pair Corralation between Northern Lights and AdvisorShares Gerber

Given the investment horizon of 90 days Northern Lights is expected to generate 2.77 times less return on investment than AdvisorShares Gerber. But when comparing it to its historical volatility, Northern Lights is 2.76 times less risky than AdvisorShares Gerber. It trades about 0.1 of its potential returns per unit of risk. AdvisorShares Gerber Kawasaki is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,924  in AdvisorShares Gerber Kawasaki on February 19, 2024 and sell it today you would earn a total of  130.00  from holding AdvisorShares Gerber Kawasaki or generate 6.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Northern Lights  vs.  AdvisorShares Gerber Kawasaki

Northern Lights

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Lights are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. 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.

AdvisorShares Gerber

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AdvisorShares Gerber Kawasaki are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating forward-looking signals, AdvisorShares Gerber may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Northern Lights and AdvisorShares Gerber

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

The idea behind Northern Lights and AdvisorShares Gerber Kawasaki 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.