Correlation Between Energy Focu and Northann Corp

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

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

Diversification Opportunities for Energy Focu and Northann Corp

0.28

Correlation Coefficient

Energy Focu  Northann Corp

Modest diversification

The 3 months correlation between Energy and Northann is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Energy Focu and Northann Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northann Corp and Energy Focu 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 Energy Focu are associated (or correlated) with Northann Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northann Corp has no effect on the direction of Energy Focu i.e., Energy Focu and Northann Corp go up and down completely randomly.

Pair Corralation between Energy Focu and Northann Corp

Given the investment horizon of 90 days Energy Focu is expected to under-perform the Northann Corp. But the stock apears to be less risky and, when comparing its historical volatility, Energy Focu is 2.38 times less risky than Northann Corp. The stock trades about -0.16 of its potential returns per unit of risk. The Northann Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  25.00  in Northann Corp on September 27, 2024 and sell it today you would earn a total of  0.38  from holding Northann Corp or generate 1.52% return on investment over 90 days.

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

Energy Focu  vs.  Northann Corp

Energy Focu

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Focu are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Energy Focu demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Northann Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Northann Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating fundamental indicators, Northann Corp disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Energy Focu and Northann Corp

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

The idea behind Energy Focu and Northann Corp 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.