Correlation Between Loandepot and Northstar Clean

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

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

Diversification Opportunities for Loandepot and Northstar Clean

-0.23

Correlation Coefficient

Loandepot  Northstar Clean

Very good diversification

The 3 months correlation between Loandepot and Northstar is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Loandepot 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 Loandepot 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 Loandepot 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 Loandepot i.e., Loandepot and Northstar Clean go up and down completely randomly.

Pair Corralation between Loandepot and Northstar Clean

Considering the 90-day investment horizon Loandepot is expected to under-perform the Northstar Clean. In addition to that, Loandepot is 1.26 times more volatile than Northstar Clean Technologies. It trades about -0.06 of its total potential returns per unit of risk. Northstar Clean Technologies is currently generating about 0.19 per unit of volatility. If you would invest  16.00  in Northstar Clean Technologies on September 13, 2024 and sell it today you would earn a total of  8.00  from holding Northstar Clean Technologies or generate 50.0% return on investment over 90 days.

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

Loandepot  vs.  Northstar Clean Technologies

Loandepot

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Loandepot has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Northstar Clean Tech

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Northstar Clean Technologies are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Northstar Clean reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Loandepot and Northstar Clean

The main advantage of trading using opposite Loandepot and Northstar Clean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Loandepot 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 Loandepot 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.

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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.