Correlation Between Northern Lights and Retireful

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

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

Diversification Opportunities for Northern Lights and Retireful

0.09

Correlation Coefficient

Northern Lights  Retireful

Significant diversification

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

Pair Corralation between Northern Lights and Retireful

Given the investment horizon of 90 days Northern Lights is expected to generate 1.05 times less return on investment than Retireful. In addition to that, Northern Lights is 39.59 times more volatile than Retireful. It trades about 0.01 of its total potential returns per unit of risk. Retireful is currently generating about 0.41 per unit of volatility. If you would invest  2,166  in Retireful on September 26, 2024 and sell it today you would earn a total of  1.00  from holding Retireful or generate 0.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	9.52%
Values	Daily Returns

Northern Lights  vs.  Retireful

Northern Lights

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Northern Lights has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Northern Lights is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Retireful

Risk-Adjusted Performance

0 of 100

Very Strong

Over the last 90 days Retireful has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Retireful is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Northern Lights and Retireful

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

The idea behind Northern Lights and Retireful 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.