Correlation Between Linde Plc and Northern Technologies
Can any of the company-specific risk be diversified away by investing in both Linde Plc 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 Linde Plc and Northern Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Linde plc Ordinary and Northern Technologies, you can compare the effects of market volatilities on Linde Plc 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 Linde Plc with a short position of Northern Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Linde Plc and Northern Technologies.
Diversification Opportunities for Linde Plc and Northern Technologies
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Linde and Northern is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Linde plc Ordinary and Northern Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Technologies and Linde Plc 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 Linde plc Ordinary 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 Linde Plc i.e., Linde Plc and Northern Technologies go up and down completely randomly.
Pair Corralation between Linde Plc and Northern Technologies
Considering the 90-day investment horizon Linde plc Ordinary is expected to under-perform the Northern Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Linde plc Ordinary is 2.8 times less risky than Northern Technologies. The stock trades about -0.19 of its potential returns per unit of risk. The Northern Technologies is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 1,252 in Northern Technologies on August 24, 2024 and sell it today you would earn a total of 172.00 from holding Northern Technologies or generate 13.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Linde plc Ordinary vs. Northern Technologies
Performance |
| Timeline |
| Linde plc Ordinary |
| Northern Technologies |
Linde Plc and Northern Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Linde Plc and Northern Technologies
The main advantage of trading using opposite Linde Plc and Northern Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Linde Plc 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.| Linde Plc vs. Eshallgo Class A | Linde Plc vs. Amtech Systems | Linde Plc vs. Gold Fields Ltd | Linde Plc vs. Aegean Airlines SA |
| 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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