Correlation Between CVW CleanTech and NORTHERN

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

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

Diversification Opportunities for CVW CleanTech and NORTHERN

0.31

Correlation Coefficient

CVW CleanTech  NORTHERN

Weak diversification

The 3 months correlation between CVW and NORTHERN is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding CVW CleanTech and NORTHERN TRUST PORATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NORTHERN TRUST PORATION and CVW CleanTech 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 CVW CleanTech are associated (or correlated) with NORTHERN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NORTHERN TRUST PORATION has no effect on the direction of CVW CleanTech i.e., CVW CleanTech and NORTHERN go up and down completely randomly.

Pair Corralation between CVW CleanTech and NORTHERN

Assuming the 90 days horizon CVW CleanTech is expected to generate 8.54 times more return on investment than NORTHERN. However, CVW CleanTech is 8.54 times more volatile than NORTHERN TRUST PORATION. It trades about 0.05 of its potential returns per unit of risk. NORTHERN TRUST PORATION is currently generating about -0.02 per unit of risk. If you would invest  57.00  in CVW CleanTech on October 26, 2024 and sell it today you would earn a total of  1.00  from holding CVW CleanTech or generate 1.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.0%
Values	Daily Returns

CVW CleanTech  vs.  NORTHERN TRUST PORATION

CVW CleanTech

Risk-Adjusted Performance

0 of 100

Very Weak

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

NORTHERN TRUST PORATION

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NORTHERN TRUST PORATION has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NORTHERN is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CVW CleanTech and NORTHERN

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

The idea behind CVW CleanTech and NORTHERN TRUST PORATION 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.