Correlation Between Northern Technologies and Minerals Technologies

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

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

Diversification Opportunities for Northern Technologies and Minerals Technologies

0.69

Correlation Coefficient

Northern Technologies  Minerals Technologies

Poor diversification

The 3 months correlation between Northern and Minerals is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Northern Technologies and Minerals Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Minerals Technologies and Northern Technologies 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 Northern Technologies are associated (or correlated) with Minerals Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Minerals Technologies has no effect on the direction of Northern Technologies i.e., Northern Technologies and Minerals Technologies go up and down completely randomly.

Pair Corralation between Northern Technologies and Minerals Technologies

Given the investment horizon of 90 days Northern Technologies is expected to under-perform the Minerals Technologies. In addition to that, Northern Technologies is 1.33 times more volatile than Minerals Technologies. It trades about -0.18 of its total potential returns per unit of risk. Minerals Technologies is currently generating about -0.19 per unit of volatility. If you would invest  7,591  in Minerals Technologies on December 29, 2024 and sell it today you would lose (1,102) from holding Minerals Technologies or give up 14.52% of portfolio value over 90 days.

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

Northern Technologies  vs.  Minerals Technologies

Northern Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Northern Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Minerals Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Minerals Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Northern Technologies and Minerals Technologies

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

The idea behind Northern Technologies and Minerals 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.