Correlation Between Nasdaq and Northland Power
Can any of the company-specific risk be diversified away by investing in both Nasdaq and Northland 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 Nasdaq and Northland Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq Inc and Northland Power, you can compare the effects of market volatilities on Nasdaq and Northland 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 Nasdaq with a short position of Northland Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and Northland Power.
Diversification Opportunities for Nasdaq and Northland Power
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Nasdaq and Northland is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Northland Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northland Power and Nasdaq 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 Nasdaq Inc are associated (or correlated) with Northland Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northland Power has no effect on the direction of Nasdaq i.e., Nasdaq and Northland Power go up and down completely randomly.
Pair Corralation between Nasdaq and Northland Power
Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.39 times more return on investment than Northland Power. However, Nasdaq Inc is 2.54 times less risky than Northland Power. It trades about 0.14 of its potential returns per unit of risk. Northland Power is currently generating about 0.0 per unit of risk. If you would invest 5,318 in Nasdaq Inc on September 14, 2024 and sell it today you would earn a total of 2,694 from holding Nasdaq Inc or generate 50.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 98.53% |
| Values | Daily Returns |
Nasdaq Inc vs. Northland Power
Performance |
| Timeline |
| Nasdaq Inc |
| Northland Power |
Nasdaq and Northland Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq and Northland Power
The main advantage of trading using opposite Nasdaq and Northland Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq position performs unexpectedly, Northland 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 Northland Power will offset losses from the drop in Northland Power's long position.The idea behind Nasdaq Inc and Northland Power 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.| Northland Power vs. Dairy Farm International | Northland Power vs. SIEM OFFSHORE NEW | Northland Power vs. Martin Marietta Materials | Northland Power vs. Rayonier Advanced Materials |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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