Correlation Between Natural Alternatives and Northstar Clean

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

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

Diversification Opportunities for Natural Alternatives and Northstar Clean

-0.67

Correlation Coefficient

Natural Alternatives  Northstar Clean

Excellent diversification

The 3 months correlation between Natural and Northstar is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Natural Alternatives Internati 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 Natural Alternatives 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 Natural Alternatives International 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 Natural Alternatives i.e., Natural Alternatives and Northstar Clean go up and down completely randomly.

Pair Corralation between Natural Alternatives and Northstar Clean

Given the investment horizon of 90 days Natural Alternatives International is expected to under-perform the Northstar Clean. But the stock apears to be less risky and, when comparing its historical volatility, Natural Alternatives International is 1.49 times less risky than Northstar Clean. The stock trades about -0.03 of its potential returns per unit of risk. The Northstar Clean Technologies is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  10.00  in Northstar Clean Technologies on October 24, 2024 and sell it today you would earn a total of  16.00  from holding Northstar Clean Technologies or generate 160.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.76%
Values	Daily Returns

Natural Alternatives Internati  vs.  Northstar Clean Technologies

Natural Alternatives

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Natural Alternatives International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, Natural Alternatives is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Northstar Clean Tech

Risk-Adjusted Performance

15 of 100

Good

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 fragile basic indicators, Northstar Clean reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Natural Alternatives and Northstar Clean

The main advantage of trading using opposite Natural Alternatives and Northstar Clean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Natural Alternatives 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 Natural Alternatives International 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.