Correlation Between Freedom Day and Northern Lights

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

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

Diversification Opportunities for Freedom Day and Northern Lights

0.51

Correlation Coefficient

Freedom Day  Northern Lights

Very weak diversification

The 3 months correlation between Freedom and Northern is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Freedom Day Dividend and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and Freedom Day 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 Freedom Day Dividend 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 Freedom Day i.e., Freedom Day and Northern Lights go up and down completely randomly.

Pair Corralation between Freedom Day and Northern Lights

Given the investment horizon of 90 days Freedom Day Dividend is expected to generate 0.92 times more return on investment than Northern Lights. However, Freedom Day Dividend is 1.09 times less risky than Northern Lights. It trades about 0.15 of its potential returns per unit of risk. Northern Lights is currently generating about -0.05 per unit of risk. If you would invest  3,119  in Freedom Day Dividend on February 11, 2024 and sell it today you would earn a total of  70.00  from holding Freedom Day Dividend or generate 2.24% return on investment over 90 days.

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

Freedom Day Dividend  vs.  Northern Lights

Freedom Day Dividend

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Freedom Day Dividend are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Freedom Day may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Northern Lights

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Lights are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Northern Lights is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Freedom Day and Northern Lights

The main advantage of trading using opposite Freedom Day and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freedom Day 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 Freedom Day Dividend 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.

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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.