Correlation Between H B and Northern Technologies
Can any of the company-specific risk be diversified away by investing in both H B and Northern Technologies 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 H B and Northern Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between H B Fuller and Northern Technologies, you can compare the effects of market volatilities on H B and Northern Technologies 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 H B with a short position of Northern Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of H B and Northern Technologies.
Diversification Opportunities for H B and Northern Technologies
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between FUL and Northern is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding H B Fuller and Northern Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Technologies and H B 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 H B Fuller are associated (or correlated) with Northern Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Technologies has no effect on the direction of H B i.e., H B and Northern Technologies go up and down completely randomly.
Pair Corralation between H B and Northern Technologies
Considering the 90-day investment horizon H B is expected to generate 8.99 times less return on investment than Northern Technologies. But when comparing it to its historical volatility, H B Fuller is 1.68 times less risky than Northern Technologies. It trades about 0.04 of its potential returns per unit of risk. Northern Technologies is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 1,245 in Northern Technologies on August 27, 2024 and sell it today you would earn a total of 154.00 from holding Northern Technologies or generate 12.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
H B Fuller vs. Northern Technologies
Performance |
| Timeline |
| H B Fuller |
| Northern Technologies |
H B and Northern Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with H B and Northern Technologies
The main advantage of trading using opposite H B and Northern Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if H B position performs unexpectedly, Northern Technologies 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 Technologies will offset losses from the drop in Northern Technologies' long position.The idea behind H B Fuller and Northern 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.| Northern Technologies vs. Innospec | Northern Technologies vs. H B Fuller | Northern Technologies vs. Quaker Chemical | Northern Technologies vs. Minerals Technologies |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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