Correlation Between Northstar Clean and Pan American
Can any of the company-specific risk be diversified away by investing in both Northstar Clean and Pan American 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 Pan American 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 Pan American Silver, you can compare the effects of market volatilities on Northstar Clean and Pan American 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 Pan American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northstar Clean and Pan American.
Diversification Opportunities for Northstar Clean and Pan American
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Northstar and Pan is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Northstar Clean Technologies and Pan American Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pan American Silver 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 Pan American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pan American Silver has no effect on the direction of Northstar Clean i.e., Northstar Clean and Pan American go up and down completely randomly.
Pair Corralation between Northstar Clean and Pan American
Assuming the 90 days trading horizon Northstar Clean Technologies is expected to generate 1.56 times more return on investment than Pan American. However, Northstar Clean is 1.56 times more volatile than Pan American Silver. It trades about 0.15 of its potential returns per unit of risk. Pan American Silver is currently generating about -0.19 per unit of risk. If you would invest 25.00 in Northstar Clean Technologies on August 28, 2024 and sell it today you would earn a total of 3.00 from holding Northstar Clean Technologies or generate 12.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northstar Clean Technologies vs. Pan American Silver
Performance |
| Timeline |
| Northstar Clean Tech |
| Pan American Silver |
Northstar Clean and Pan American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northstar Clean and Pan American
The main advantage of trading using opposite Northstar Clean and Pan American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northstar Clean position performs unexpectedly, Pan American 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 Pan American will offset losses from the drop in Pan American's long position.The idea behind Northstar Clean Technologies and Pan American Silver 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.| Pan American vs. Firan Technology Group | Pan American vs. SalesforceCom CDR | Pan American vs. Hemisphere Energy | Pan American vs. Oculus VisionTech |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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