Correlation Between NorthWestern and Pinterest
Can any of the company-specific risk be diversified away by investing in both NorthWestern and Pinterest 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 NorthWestern and Pinterest into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NorthWestern and Pinterest, you can compare the effects of market volatilities on NorthWestern and Pinterest 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 NorthWestern with a short position of Pinterest. Check out your portfolio center. Please also check ongoing floating volatility patterns of NorthWestern and Pinterest.
Diversification Opportunities for NorthWestern and Pinterest
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between NorthWestern and Pinterest is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding NorthWestern and Pinterest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pinterest and NorthWestern 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 NorthWestern are associated (or correlated) with Pinterest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pinterest has no effect on the direction of NorthWestern i.e., NorthWestern and Pinterest go up and down completely randomly.
Pair Corralation between NorthWestern and Pinterest
Considering the 90-day investment horizon NorthWestern is expected to generate 0.35 times more return on investment than Pinterest. However, NorthWestern is 2.82 times less risky than Pinterest. It trades about 0.1 of its potential returns per unit of risk. Pinterest is currently generating about -0.07 per unit of risk. If you would invest 5,534 in NorthWestern on August 27, 2024 and sell it today you would earn a total of 141.00 from holding NorthWestern or generate 2.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NorthWestern vs. Pinterest
Performance |
| Timeline |
| NorthWestern |
NorthWestern and Pinterest Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NorthWestern and Pinterest
The main advantage of trading using opposite NorthWestern and Pinterest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NorthWestern position performs unexpectedly, Pinterest 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 Pinterest will offset losses from the drop in Pinterest's long position.| NorthWestern vs. Allete Inc | NorthWestern vs. Black Hills | NorthWestern vs. Otter Tail | NorthWestern vs. Avista |
| Pinterest vs. Alphabet Inc Class C | Pinterest vs. Twilio Inc | Pinterest vs. Snap Inc | Pinterest vs. Baidu Inc |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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