Correlation Between Northstar Clean and American Hotel
Can any of the company-specific risk be diversified away by investing in both Northstar Clean and American Hotel 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 Northstar Clean and American Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northstar Clean Technologies and American Hotel Income, you can compare the effects of market volatilities on Northstar Clean and American Hotel 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 Northstar Clean with a short position of American Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northstar Clean and American Hotel.
Diversification Opportunities for Northstar Clean and American Hotel
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Northstar and American is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Northstar Clean Technologies and American Hotel Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Hotel Income and Northstar Clean 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 Northstar Clean Technologies are associated (or correlated) with American Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Hotel Income has no effect on the direction of Northstar Clean i.e., Northstar Clean and American Hotel go up and down completely randomly.
Pair Corralation between Northstar Clean and American Hotel
Assuming the 90 days trading horizon Northstar Clean Technologies is expected to generate 0.9 times more return on investment than American Hotel. However, Northstar Clean Technologies is 1.12 times less risky than American Hotel. It trades about 0.06 of its potential returns per unit of risk. American Hotel Income is currently generating about -0.02 per unit of risk. If you would invest 16.00 in Northstar Clean Technologies on November 27, 2024 and sell it today you would earn a total of 21.00 from holding Northstar Clean Technologies or generate 131.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 84.11% |
| Values | Daily Returns |
Northstar Clean Technologies vs. American Hotel Income
Performance |
| Timeline |
| Northstar Clean Tech |
| American Hotel Income |
Northstar Clean and American Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northstar Clean and American Hotel
The main advantage of trading using opposite Northstar Clean and American Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northstar Clean position performs unexpectedly, American Hotel 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 American Hotel will offset losses from the drop in American Hotel's long position.The idea behind Northstar Clean Technologies and American Hotel Income pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| American Hotel vs. Applied Materials, | American Hotel vs. Nova Leap Health | American Hotel vs. Bird Construction | American Hotel vs. NeuPath Health |
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 Correlations module to find global opportunities by holding instruments from different markets.
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