Correlation Between Northland Power and Boralex
Can any of the company-specific risk be diversified away by investing in both Northland Power and Boralex 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 Northland Power and Boralex into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northland Power and Boralex, you can compare the effects of market volatilities on Northland Power and Boralex 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 Northland Power with a short position of Boralex. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northland Power and Boralex.
Diversification Opportunities for Northland Power and Boralex
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Northland and Boralex is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Northland Power and Boralex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boralex and Northland Power 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 Northland Power are associated (or correlated) with Boralex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boralex has no effect on the direction of Northland Power i.e., Northland Power and Boralex go up and down completely randomly.
Pair Corralation between Northland Power and Boralex
Assuming the 90 days trading horizon Northland Power is expected to generate 1.25 times more return on investment than Boralex. However, Northland Power is 1.25 times more volatile than Boralex. It trades about -0.08 of its potential returns per unit of risk. Boralex is currently generating about -0.27 per unit of risk. If you would invest 2,090 in Northland Power on August 30, 2024 and sell it today you would lose (87.00) from holding Northland Power or give up 4.16% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Northland Power vs. Boralex
Performance |
| Timeline |
| Northland Power |
| Boralex |
Northland Power and Boralex Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northland Power and Boralex
The main advantage of trading using opposite Northland Power and Boralex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northland Power position performs unexpectedly, Boralex 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 Boralex will offset losses from the drop in Boralex's long position.| Northland Power vs. Brookfield Renewable Partners | Northland Power vs. Algonquin Power Utilities | Northland Power vs. Innergex Renewable Energy | Northland Power vs. Capital Power |
| Boralex vs. Fortis Inc | Boralex vs. Enbridge | Boralex vs. Telus Corp | Boralex vs. Brookfield Renewable Partners |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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