Correlation Between Quaker Chemical and Northern Technologies
Can any of the company-specific risk be diversified away by investing in both Quaker Chemical 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 Quaker Chemical and Northern Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Quaker Chemical and Northern Technologies, you can compare the effects of market volatilities on Quaker Chemical 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 Quaker Chemical with a short position of Northern Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Quaker Chemical and Northern Technologies.
Diversification Opportunities for Quaker Chemical and Northern Technologies
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Quaker and Northern is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Quaker Chemical and Northern Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Technologies and Quaker Chemical 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 Quaker Chemical 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 Quaker Chemical i.e., Quaker Chemical and Northern Technologies go up and down completely randomly.
Pair Corralation between Quaker Chemical and Northern Technologies
Considering the 90-day investment horizon Quaker Chemical is expected to under-perform the Northern Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Quaker Chemical is 1.32 times less risky than Northern Technologies. The stock trades about -0.03 of its potential returns per unit of risk. The Northern Technologies is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 1,245 in Northern Technologies on November 2, 2024 and sell it today you would lose (30.00) from holding Northern Technologies or give up 2.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Quaker Chemical vs. Northern Technologies
Performance |
| Timeline |
| Quaker Chemical |
| Northern Technologies |
Quaker Chemical and Northern Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Quaker Chemical and Northern Technologies
The main advantage of trading using opposite Quaker Chemical and Northern Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quaker Chemical 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.| Quaker Chemical vs. Minerals Technologies | Quaker Chemical vs. Innospec | Quaker Chemical vs. H B Fuller | Quaker Chemical vs. Cabot |
| 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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