Correlation Between North Peak and Cavitation Techs

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

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

Diversification Opportunities for North Peak and Cavitation Techs

-0.52

Correlation Coefficient

North Peak  Cavitation Techs

Excellent diversification

The 3 months correlation between North and Cavitation is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding North Peak Resources and Cavitation Techs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cavitation Techs and North Peak 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 North Peak Resources are associated (or correlated) with Cavitation Techs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cavitation Techs has no effect on the direction of North Peak i.e., North Peak and Cavitation Techs go up and down completely randomly.

Pair Corralation between North Peak and Cavitation Techs

Assuming the 90 days horizon North Peak Resources is expected to generate 1.07 times more return on investment than Cavitation Techs. However, North Peak is 1.07 times more volatile than Cavitation Techs. It trades about 0.0 of its potential returns per unit of risk. Cavitation Techs is currently generating about -0.05 per unit of risk. If you would invest  45.00  in North Peak Resources on November 23, 2024 and sell it today you would lose (2.00) from holding North Peak Resources or give up 4.44% of portfolio value over 90 days.

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

North Peak Resources  vs.  Cavitation Techs

North Peak Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days North Peak Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Cavitation Techs

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cavitation Techs are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Cavitation Techs unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with North Peak and Cavitation Techs

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

The idea behind North Peak Resources and Cavitation Techs 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.

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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.