Correlation Between Northland Power and SHIP HEALTHCARE

Can any of the company-specific risk be diversified away by investing in both Northland Power and SHIP HEALTHCARE 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 Northland Power and SHIP HEALTHCARE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Northland Power and SHIP HEALTHCARE HLDGINC, you can compare the effects of market volatilities on Northland Power and SHIP HEALTHCARE 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 Northland Power with a short position of SHIP HEALTHCARE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northland Power and SHIP HEALTHCARE.

Diversification Opportunities for Northland Power and SHIP HEALTHCARE

0.5

Correlation Coefficient

Northland Power  SHIP HEALTHCARE

Very weak diversification

The 3 months correlation between Northland and SHIP is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Northland Power and SHIP HEALTHCARE HLDGINC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SHIP HEALTHCARE HLDGINC and Northland Power 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 Northland Power are associated (or correlated) with SHIP HEALTHCARE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SHIP HEALTHCARE HLDGINC has no effect on the direction of Northland Power i.e., Northland Power and SHIP HEALTHCARE go up and down completely randomly.

Pair Corralation between Northland Power and SHIP HEALTHCARE

Assuming the 90 days horizon Northland Power is expected to under-perform the SHIP HEALTHCARE. But the stock apears to be less risky and, when comparing its historical volatility, Northland Power is 1.04 times less risky than SHIP HEALTHCARE. The stock trades about -0.03 of its potential returns per unit of risk. The SHIP HEALTHCARE HLDGINC is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,130  in SHIP HEALTHCARE HLDGINC on October 4, 2024 and sell it today you would earn a total of  190.00  from holding SHIP HEALTHCARE HLDGINC or generate 16.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Northland Power  vs.  SHIP HEALTHCARE HLDGINC

Northland Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Northland Power has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

SHIP HEALTHCARE HLDGINC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SHIP HEALTHCARE HLDGINC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, SHIP HEALTHCARE is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Northland Power and SHIP HEALTHCARE

The main advantage of trading using opposite Northland Power and SHIP HEALTHCARE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northland Power position performs unexpectedly, SHIP HEALTHCARE 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 SHIP HEALTHCARE will offset losses from the drop in SHIP HEALTHCARE's long position.

The idea behind Northland Power and SHIP HEALTHCARE HLDGINC 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.

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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.