Correlation Between Atco and NorthWestern

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

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

Diversification Opportunities for Atco and NorthWestern

0.57

Correlation Coefficient

Atco  NorthWestern

Very weak diversification

The 3 months correlation between Atco and NorthWestern is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Atco and NorthWestern in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NorthWestern and Atco 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 Atco are associated (or correlated) with NorthWestern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NorthWestern has no effect on the direction of Atco i.e., Atco and NorthWestern go up and down completely randomly.

Pair Corralation between Atco and NorthWestern

Assuming the 90 days horizon Atco is expected to under-perform the NorthWestern. But the pink sheet apears to be less risky and, when comparing its historical volatility, Atco is 1.6 times less risky than NorthWestern. The pink sheet trades about -0.23 of its potential returns per unit of risk. The NorthWestern is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  5,234  in NorthWestern on October 8, 2024 and sell it today you would earn a total of  80.00  from holding NorthWestern or generate 1.53% return on investment over 90 days.

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

Atco  vs.  NorthWestern

Atco

Risk-Adjusted Performance

0 of 100

Very Weak

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

NorthWestern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NorthWestern has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, NorthWestern is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Atco and NorthWestern

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

The idea behind Atco and NorthWestern 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.