Correlation Between Open Text and Northland Power
Can any of the company-specific risk be diversified away by investing in both Open Text and Northland Power 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 Open Text and Northland Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Open Text Corp and Northland Power, you can compare the effects of market volatilities on Open Text and Northland Power 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 Open Text with a short position of Northland Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Open Text and Northland Power.
Diversification Opportunities for Open Text and Northland Power
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Open and Northland is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Open Text Corp and Northland Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northland Power and Open Text 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 Open Text Corp are associated (or correlated) with Northland Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northland Power has no effect on the direction of Open Text i.e., Open Text and Northland Power go up and down completely randomly.
Pair Corralation between Open Text and Northland Power
Assuming the 90 days trading horizon Open Text Corp is expected to under-perform the Northland Power. In addition to that, Open Text is 1.16 times more volatile than Northland Power. It trades about -0.05 of its total potential returns per unit of risk. Northland Power is currently generating about -0.03 per unit of volatility. If you would invest 2,219 in Northland Power on August 27, 2024 and sell it today you would lose (249.00) from holding Northland Power or give up 11.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Open Text Corp vs. Northland Power
Performance |
| Timeline |
| Open Text Corp |
| Northland Power |
Open Text and Northland Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Open Text and Northland Power
The main advantage of trading using opposite Open Text and Northland Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Open Text position performs unexpectedly, Northland Power 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 Northland Power will offset losses from the drop in Northland Power's long position.| Open Text vs. Slate Grocery REIT | Open Text vs. Roots Corp | Open Text vs. Aimia Inc | Open Text vs. Tucows Inc |
| Northland Power vs. Boralex | Northland Power vs. Capital Power | Northland Power 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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