Correlation Between Northern Technologies and Quaker Chemical
Can any of the company-specific risk be diversified away by investing in both Northern Technologies and Quaker Chemical 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 Northern Technologies and Quaker Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Technologies and Quaker Chemical, you can compare the effects of market volatilities on Northern Technologies and Quaker Chemical 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 Northern Technologies with a short position of Quaker Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Technologies and Quaker Chemical.
Diversification Opportunities for Northern Technologies and Quaker Chemical
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Northern and Quaker is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Northern Technologies and Quaker Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quaker Chemical and Northern Technologies 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 Northern Technologies are associated (or correlated) with Quaker Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quaker Chemical has no effect on the direction of Northern Technologies i.e., Northern Technologies and Quaker Chemical go up and down completely randomly.
Pair Corralation between Northern Technologies and Quaker Chemical
Given the investment horizon of 90 days Northern Technologies is expected to generate 1.32 times more return on investment than Quaker Chemical. However, Northern Technologies is 1.32 times more volatile than Quaker Chemical. It trades about 0.01 of its potential returns per unit of risk. Quaker Chemical is currently generating about -0.03 per unit of risk. 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 |
Northern Technologies vs. Quaker Chemical
Performance |
| Timeline |
| Northern Technologies |
| Quaker Chemical |
Northern Technologies and Quaker Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Technologies and Quaker Chemical
The main advantage of trading using opposite Northern Technologies and Quaker Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Technologies position performs unexpectedly, Quaker Chemical 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 Quaker Chemical will offset losses from the drop in Quaker Chemical's long position.| Northern Technologies vs. Innospec | Northern Technologies vs. H B Fuller | Northern Technologies vs. Quaker Chemical | Northern Technologies vs. Minerals Technologies |
| Quaker Chemical vs. Minerals Technologies | Quaker Chemical vs. Innospec | Quaker Chemical vs. H B Fuller | Quaker Chemical vs. Cabot |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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