Correlation Between North West and Stella Jones
Can any of the company-specific risk be diversified away by investing in both North West and Stella Jones 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 North West and Stella Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North West and Stella Jones, you can compare the effects of market volatilities on North West and Stella Jones 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 North West with a short position of Stella Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of North West and Stella Jones.
Diversification Opportunities for North West and Stella Jones
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between North and Stella is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding North West and Stella Jones in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stella Jones and North West 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 North West are associated (or correlated) with Stella Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stella Jones has no effect on the direction of North West i.e., North West and Stella Jones go up and down completely randomly.
Pair Corralation between North West and Stella Jones
Assuming the 90 days trading horizon North West is expected to generate 0.37 times more return on investment than Stella Jones. However, North West is 2.72 times less risky than Stella Jones. It trades about 0.07 of its potential returns per unit of risk. Stella Jones is currently generating about -0.25 per unit of risk. If you would invest 5,117 in North West on August 28, 2024 and sell it today you would earn a total of 81.00 from holding North West or generate 1.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
North West vs. Stella Jones
Performance |
| Timeline |
| North West |
| Stella Jones |
North West and Stella Jones Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North West and Stella Jones
The main advantage of trading using opposite North West and Stella Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North West position performs unexpectedly, Stella Jones 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 Stella Jones will offset losses from the drop in Stella Jones' long position.| North West vs. Covalon Technologies | North West vs. Sirona Biochem Corp | North West vs. Medicure | North West vs. Arch Biopartners |
| Stella Jones vs. Richelieu Hardware | Stella Jones vs. CCL Industries | Stella Jones vs. Stantec | Stella Jones vs. Gildan Activewear |
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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