Correlation Between Labrador Iron and Northstar Clean

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

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

Diversification Opportunities for Labrador Iron and Northstar Clean

-0.76

Correlation Coefficient

Labrador Iron  Northstar Clean

Pay attention - limited upside

The 3 months correlation between Labrador and Northstar is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Labrador Iron Ore 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 Labrador Iron 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 Labrador Iron Ore 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 Labrador Iron i.e., Labrador Iron and Northstar Clean go up and down completely randomly.

Pair Corralation between Labrador Iron and Northstar Clean

Assuming the 90 days trading horizon Labrador Iron is expected to generate 36.88 times less return on investment than Northstar Clean. But when comparing it to its historical volatility, Labrador Iron Ore is 4.38 times less risky than Northstar Clean. It trades about 0.04 of its potential returns per unit of risk. Northstar Clean Technologies is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  28.00  in Northstar Clean Technologies on September 25, 2024 and sell it today you would earn a total of  10.00  from holding Northstar Clean Technologies or generate 35.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Labrador Iron Ore  vs.  Northstar Clean Technologies

Labrador Iron Ore

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Labrador Iron Ore has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Northstar Clean Tech

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Northstar Clean Technologies are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Northstar Clean showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Labrador Iron and Northstar Clean

The main advantage of trading using opposite Labrador Iron and Northstar Clean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Labrador Iron 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 Labrador Iron Ore 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.