Correlation Between ZEGA Buy and Northern Lights

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

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

Diversification Opportunities for ZEGA Buy and Northern Lights

0.92

Correlation Coefficient

ZEGA Buy Northern Lights

Almost no diversification

The 3 months correlation between ZEGA and Northern is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding ZEGA Buy And and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and ZEGA Buy 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 ZEGA Buy And 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 ZEGA Buy i.e., ZEGA Buy and Northern Lights go up and down completely randomly.

Pair Corralation between ZEGA Buy and Northern Lights

Given the investment horizon of 90 days ZEGA Buy is expected to generate 2.75 times less return on investment than Northern Lights. But when comparing it to its historical volatility, ZEGA Buy And is 1.11 times less risky than Northern Lights. It trades about 0.02 of its potential returns per unit of risk. Northern Lights is currently generating about 0.06 of returns per unit of risk over similar time horizon. 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.

ZEGA Buy And  vs.  Northern Lights

ZEGA Buy And

ZEGA Performance

12 of 100

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

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.

Pair Trading with ZEGA Buy and Northern Lights

The main advantage of trading using opposite ZEGA Buy and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ZEGA Buy 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 ZEGA Buy And 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.