Correlation Between Northstar Clean and Nutrien
Can any of the company-specific risk be diversified away by investing in both Northstar Clean and Nutrien 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 Nutrien 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 Nutrien, you can compare the effects of market volatilities on Northstar Clean and Nutrien 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 Nutrien. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northstar Clean and Nutrien.
Diversification Opportunities for Northstar Clean and Nutrien
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Northstar and Nutrien is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Northstar Clean Technologies and Nutrien in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nutrien 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 Nutrien. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nutrien has no effect on the direction of Northstar Clean i.e., Northstar Clean and Nutrien go up and down completely randomly.
Pair Corralation between Northstar Clean and Nutrien
Assuming the 90 days trading horizon Northstar Clean is expected to generate 1.2 times less return on investment than Nutrien. In addition to that, Northstar Clean is 1.87 times more volatile than Nutrien. It trades about 0.25 of its total potential returns per unit of risk. Nutrien is currently generating about 0.55 per unit of volatility. If you would invest 6,284 in Nutrien on October 20, 2024 and sell it today you would earn a total of 1,176 from holding Nutrien or generate 18.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northstar Clean Technologies vs. Nutrien
Performance |
| Timeline |
| Northstar Clean Tech |
| Nutrien |
Northstar Clean and Nutrien Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northstar Clean and Nutrien
The main advantage of trading using opposite Northstar Clean and Nutrien positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northstar Clean position performs unexpectedly, Nutrien 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 Nutrien will offset losses from the drop in Nutrien's long position.The idea behind Northstar Clean Technologies and Nutrien 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.| Nutrien vs. E L Financial Corp | Nutrien vs. Magna Mining | Nutrien vs. Fairfax Financial Holdings | Nutrien vs. Forsys Metals Corp |
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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