Correlation Between Northstar Clean and TMX Group
Can any of the company-specific risk be diversified away by investing in both Northstar Clean and TMX Group 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 TMX Group 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 TMX Group Limited, you can compare the effects of market volatilities on Northstar Clean and TMX Group 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 TMX Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northstar Clean and TMX Group.
Diversification Opportunities for Northstar Clean and TMX Group
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Northstar and TMX is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Northstar Clean Technologies and TMX Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TMX Group Limited 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 TMX Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TMX Group Limited has no effect on the direction of Northstar Clean i.e., Northstar Clean and TMX Group go up and down completely randomly.
Pair Corralation between Northstar Clean and TMX Group
Assuming the 90 days trading horizon Northstar Clean Technologies is expected to generate 4.75 times more return on investment than TMX Group. However, Northstar Clean is 4.75 times more volatile than TMX Group Limited. It trades about 0.08 of its potential returns per unit of risk. TMX Group Limited is currently generating about 0.15 per unit of risk. If you would invest 20.00 in Northstar Clean Technologies on September 3, 2024 and sell it today you would earn a total of 9.00 from holding Northstar Clean Technologies or generate 45.0% 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. TMX Group Limited
Performance |
| Timeline |
| Northstar Clean Tech |
| TMX Group Limited |
Northstar Clean and TMX Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northstar Clean and TMX Group
The main advantage of trading using opposite Northstar Clean and TMX Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northstar Clean position performs unexpectedly, TMX Group 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 TMX Group will offset losses from the drop in TMX Group's long position.The idea behind Northstar Clean Technologies and TMX Group Limited 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.| TMX Group vs. Western Investment | TMX Group vs. Diversified Royalty Corp | TMX Group vs. Northstar Clean Technologies | TMX Group vs. CVW CleanTech |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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