Correlation Between Northstar Clean and Canfor

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

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

Diversification Opportunities for Northstar Clean and Canfor

-0.64

Correlation Coefficient

Northstar Clean  Canfor

Excellent diversification

The 3 months correlation between Northstar and Canfor is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Northstar Clean Technologies and Canfor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canfor and Northstar Clean 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 Northstar Clean Technologies are associated (or correlated) with Canfor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canfor has no effect on the direction of Northstar Clean i.e., Northstar Clean and Canfor go up and down completely randomly.

Pair Corralation between Northstar Clean and Canfor

Assuming the 90 days trading horizon Northstar Clean is expected to generate 1.04 times less return on investment than Canfor. In addition to that, Northstar Clean is 2.21 times more volatile than Canfor. It trades about 0.11 of its total potential returns per unit of risk. Canfor is currently generating about 0.25 per unit of volatility. If you would invest  1,474  in Canfor on October 24, 2024 and sell it today you would earn a total of  99.00  from holding Canfor or generate 6.72% return on investment over 90 days.

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

Northstar Clean Technologies  vs.  Canfor

Northstar Clean Tech

Risk-Adjusted Performance

13 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Northstar Clean Technologies are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Northstar Clean showed solid returns over the last few months and may actually be approaching a breakup point.

Canfor

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Northstar Clean and Canfor

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

The idea behind Northstar Clean Technologies and Canfor 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.