Correlation Between Northern Lights and Keating Active

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

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

Diversification Opportunities for Northern Lights and Keating Active

0.23

Correlation Coefficient

Northern Lights  Keating Active

Modest diversification

The 3 months correlation between Northern and Keating is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and Keating Active ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keating Active ETF 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 Keating Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keating Active ETF has no effect on the direction of Northern Lights i.e., Northern Lights and Keating Active go up and down completely randomly.

Pair Corralation between Northern Lights and Keating Active

Given the investment horizon of 90 days Northern Lights is expected to generate 1.63 times more return on investment than Keating Active. However, Northern Lights is 1.63 times more volatile than Keating Active ETF. It trades about 0.16 of its potential returns per unit of risk. Keating Active ETF is currently generating about 0.03 per unit of risk. If you would invest  3,407  in Northern Lights on September 12, 2024 and sell it today you would earn a total of  225.00  from holding Northern Lights or generate 6.6% return on investment over 90 days.

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

Northern Lights  vs.  Keating Active ETF

Northern Lights

Risk-Adjusted Performance

12 of 100

OK

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 fragile fundamental indicators, Northern Lights may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Keating Active ETF

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Keating Active ETF are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Keating Active is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Northern Lights and Keating Active

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

The idea behind Northern Lights and Keating Active ETF 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 Stocks Directory module to find actively traded stocks across global markets.