Correlation Between Capital Clean and Northstar Clean

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

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

Diversification Opportunities for Capital Clean and Northstar Clean

-0.53

Correlation Coefficient

Capital Clean  Northstar Clean

Excellent diversification

The 3 months correlation between Capital and Northstar is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Capital Clean Energy 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 Capital 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 Capital Clean Energy 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 Capital Clean i.e., Capital Clean and Northstar Clean go up and down completely randomly.

Pair Corralation between Capital Clean and Northstar Clean

Given the investment horizon of 90 days Capital Clean Energy is expected to generate 0.44 times more return on investment than Northstar Clean. However, Capital Clean Energy is 2.26 times less risky than Northstar Clean. It trades about 0.09 of its potential returns per unit of risk. Northstar Clean Technologies is currently generating about -0.04 per unit of risk. If you would invest  1,819  in Capital Clean Energy on December 30, 2024 and sell it today you would earn a total of  160.00  from holding Capital Clean Energy or generate 8.8% return on investment over 90 days.

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

Capital Clean Energy  vs.  Northstar Clean Technologies

Capital Clean Energy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Clean Energy are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Capital Clean may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Capital Clean and Northstar Clean

The main advantage of trading using opposite Capital Clean and Northstar Clean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Clean 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 Capital Clean Energy 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.