Correlation Between Northern Lights and PFV

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

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

Diversification Opportunities for Northern Lights and PFV

0.0

Correlation Coefficient

Northern Lights  PFV

Pay attention - limited upside

The 3 months correlation between Northern and PFV is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and PFV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PFV 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 PFV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PFV has no effect on the direction of Northern Lights i.e., Northern Lights and PFV go up and down completely randomly.

Pair Corralation between Northern Lights and PFV

If you would invest  2,503  in Northern Lights on September 21, 2024 and sell it today you would earn a total of  983.00  from holding Northern Lights or generate 39.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Northern Lights  vs.  PFV

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.

PFV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PFV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, PFV is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Northern Lights and PFV

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

The idea behind Northern Lights and PFV 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.