Correlation Between Air Canada and Northstar Clean
Can any of the company-specific risk be diversified away by investing in both Air Canada and Northstar Clean 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 Air Canada and Northstar Clean into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Canada and Northstar Clean Technologies, you can compare the effects of market volatilities on Air Canada and Northstar Clean 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 Air Canada with a short position of Northstar Clean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Canada and Northstar Clean.
Diversification Opportunities for Air Canada and Northstar Clean
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Air and Northstar is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Air Canada and Northstar Clean Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northstar Clean Tech and Air Canada 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 Air Canada are associated (or correlated) with Northstar Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northstar Clean Tech has no effect on the direction of Air Canada i.e., Air Canada and Northstar Clean go up and down completely randomly.
Pair Corralation between Air Canada and Northstar Clean
Assuming the 90 days horizon Air Canada is expected to under-perform the Northstar Clean. But the stock apears to be less risky and, when comparing its historical volatility, Air Canada is 1.61 times less risky than Northstar Clean. The stock trades about -0.39 of its potential returns per unit of risk. The Northstar Clean Technologies is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 36.00 in Northstar Clean Technologies on November 27, 2024 and sell it today you would earn a total of 1.00 from holding Northstar Clean Technologies or generate 2.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Canada vs. Northstar Clean Technologies
Performance |
| Timeline |
| Air Canada |
| Northstar Clean Tech |
Air Canada and Northstar Clean Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Canada and Northstar Clean
The main advantage of trading using opposite Air Canada and Northstar Clean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Canada position performs unexpectedly, Northstar Clean 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 Northstar Clean will offset losses from the drop in Northstar Clean's long position.The idea behind Air Canada and Northstar Clean Technologies 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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