Correlation Between Caseys General and Northland Power

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

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

Diversification Opportunities for Caseys General and Northland Power

-0.62

Correlation Coefficient

Caseys General  Northland Power

Excellent diversification

The 3 months correlation between Caseys and Northland is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Caseys General Stores and Northland Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northland Power and Caseys General 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 Caseys General Stores are associated (or correlated) with Northland Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northland Power has no effect on the direction of Caseys General i.e., Caseys General and Northland Power go up and down completely randomly.

Pair Corralation between Caseys General and Northland Power

Assuming the 90 days trading horizon Caseys General Stores is expected to under-perform the Northland Power. But the stock apears to be less risky and, when comparing its historical volatility, Caseys General Stores is 1.52 times less risky than Northland Power. The stock trades about -0.04 of its potential returns per unit of risk. The Northland Power is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,224  in Northland Power on December 23, 2024 and sell it today you would earn a total of  31.00  from holding Northland Power or generate 2.53% return on investment over 90 days.

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

Caseys General Stores  vs.  Northland Power

Caseys General Stores

Risk-Adjusted Performance

Very Weak

Over the last 90 days Caseys General Stores has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Caseys General is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Northland Power

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Northland Power are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Northland Power is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Caseys General and Northland Power

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

The idea behind Caseys General Stores and Northland Power 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 Commodity Directory module to find actively traded commodities issued by global exchanges.