Correlation Between Northland Power and Huaneng Power
Can any of the company-specific risk be diversified away by investing in both Northland Power and Huaneng Power 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 Northland Power and Huaneng Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northland Power and Huaneng Power International, you can compare the effects of market volatilities on Northland Power and Huaneng Power 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 Northland Power with a short position of Huaneng Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northland Power and Huaneng Power.
Diversification Opportunities for Northland Power and Huaneng Power
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Northland and Huaneng is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Northland Power and Huaneng Power International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huaneng Power Intern and Northland Power 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 Northland Power are associated (or correlated) with Huaneng Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huaneng Power Intern has no effect on the direction of Northland Power i.e., Northland Power and Huaneng Power go up and down completely randomly.
Pair Corralation between Northland Power and Huaneng Power
Assuming the 90 days horizon Northland Power is expected to under-perform the Huaneng Power. But the stock apears to be less risky and, when comparing its historical volatility, Northland Power is 2.05 times less risky than Huaneng Power. The stock trades about -0.05 of its potential returns per unit of risk. The Huaneng Power International is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 44.00 in Huaneng Power International on September 26, 2024 and sell it today you would earn a total of 6.00 from holding Huaneng Power International or generate 13.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northland Power vs. Huaneng Power International
Performance |
| Timeline |
| Northland Power |
| Huaneng Power Intern |
Northland Power and Huaneng Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northland Power and Huaneng Power
The main advantage of trading using opposite Northland Power and Huaneng Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northland Power position performs unexpectedly, Huaneng Power 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 Huaneng Power will offset losses from the drop in Huaneng Power's long position.| Northland Power vs. Orsted AS | Northland Power vs. EDP Renovveis SA | Northland Power vs. CGN Power Co | Northland Power vs. Huaneng Power International |
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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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