Correlation Between Aqua Metals and Northstar Clean

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

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

Diversification Opportunities for Aqua Metals and Northstar Clean

0.71

Correlation Coefficient

Aqua Metals  Northstar Clean

Poor diversification

The 3 months correlation between Aqua and Northstar is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Aqua Metals and Northstar Clean Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northstar Clean Tech and Aqua Metals 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 Aqua Metals are associated (or correlated) with Northstar Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northstar Clean Tech has no effect on the direction of Aqua Metals i.e., Aqua Metals and Northstar Clean go up and down completely randomly.

Pair Corralation between Aqua Metals and Northstar Clean

Given the investment horizon of 90 days Aqua Metals is expected to under-perform the Northstar Clean. In addition to that, Aqua Metals is 1.71 times more volatile than Northstar Clean Technologies. It trades about -0.03 of its total potential returns per unit of risk. Northstar Clean Technologies is currently generating about -0.02 per unit of volatility. If you would invest  27.00  in Northstar Clean Technologies on December 29, 2024 and sell it today you would lose (2.00) from holding Northstar Clean Technologies or give up 7.41% of portfolio value over 90 days.

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

Aqua Metals  vs.  Northstar Clean Technologies

Aqua Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aqua Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Northstar Clean Tech

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Aqua Metals and Northstar Clean

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

The idea behind Aqua Metals and Northstar Clean Technologies 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.