Correlation Between Northern Lights and Professionally Managed

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

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

Diversification Opportunities for Northern Lights and Professionally Managed

0.5

Correlation Coefficient

Northern Lights  Professionally Managed

Very weak diversification

The 3 months correlation between Northern and Professionally is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights and Professionally Managed Portfol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Professionally Managed 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 Professionally Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Professionally Managed has no effect on the direction of Northern Lights i.e., Northern Lights and Professionally Managed go up and down completely randomly.

Pair Corralation between Northern Lights and Professionally Managed

Given the investment horizon of 90 days Northern Lights is expected to generate 0.54 times more return on investment than Professionally Managed. However, Northern Lights is 1.86 times less risky than Professionally Managed. It trades about -0.05 of its potential returns per unit of risk. Professionally Managed Portfolios is currently generating about -0.1 per unit of risk. If you would invest  3,693  in Northern Lights on August 30, 2025 and sell it today you would lose (33.00) from holding Northern Lights or give up 0.89% of portfolio value over 90 days.

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

Northern Lights  vs.  Professionally Managed Portfol

Northern Lights

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Lights are ranked lower than 1 (%) 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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

Professionally Managed

Risk-Adjusted Performance

Weakest

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

Pair Trading with Northern Lights and Professionally Managed

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

The idea behind Northern Lights and Professionally Managed Portfolios 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.