Correlation Between Northland Power and Polaris Infrastructure
Can any of the company-specific risk be diversified away by investing in both Northland Power and Polaris Infrastructure 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 Polaris Infrastructure into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northland Power and Polaris Infrastructure, you can compare the effects of market volatilities on Northland Power and Polaris Infrastructure 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 Polaris Infrastructure. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northland Power and Polaris Infrastructure.
Diversification Opportunities for Northland Power and Polaris Infrastructure
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Northland and Polaris is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Northland Power and Polaris Infrastructure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polaris Infrastructure 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 Polaris Infrastructure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polaris Infrastructure has no effect on the direction of Northland Power i.e., Northland Power and Polaris Infrastructure go up and down completely randomly.
Pair Corralation between Northland Power and Polaris Infrastructure
Assuming the 90 days trading horizon Northland Power is expected to under-perform the Polaris Infrastructure. In addition to that, Northland Power is 1.64 times more volatile than Polaris Infrastructure. It trades about -0.17 of its total potential returns per unit of risk. Polaris Infrastructure is currently generating about -0.02 per unit of volatility. If you would invest 1,302 in Polaris Infrastructure on October 25, 2024 and sell it today you would lose (12.00) from holding Polaris Infrastructure or give up 0.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northland Power vs. Polaris Infrastructure
Performance |
| Timeline |
| Northland Power |
| Polaris Infrastructure |
Northland Power and Polaris Infrastructure Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northland Power and Polaris Infrastructure
The main advantage of trading using opposite Northland Power and Polaris Infrastructure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northland Power position performs unexpectedly, Polaris Infrastructure 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 Polaris Infrastructure will offset losses from the drop in Polaris Infrastructure'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 |
| Polaris Infrastructure vs. Innergex Renewable Energy | Polaris Infrastructure vs. Boralex | Polaris Infrastructure vs. Northland Power |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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