Correlation Between Northstar Clean and Rocky Mountain

Can any of the company-specific risk be diversified away by investing in both Northstar Clean and Rocky Mountain 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 Rocky Mountain 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 Rocky Mountain Liquor, you can compare the effects of market volatilities on Northstar Clean and Rocky Mountain 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 Rocky Mountain. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northstar Clean and Rocky Mountain.

Diversification Opportunities for Northstar Clean and Rocky Mountain

-0.87

Correlation Coefficient

Northstar Clean  Rocky Mountain

Pay attention - limited upside

The 3 months correlation between Northstar and Rocky is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Northstar Clean Technologies and Rocky Mountain Liquor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rocky Mountain Liquor 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 Rocky Mountain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rocky Mountain Liquor has no effect on the direction of Northstar Clean i.e., Northstar Clean and Rocky Mountain go up and down completely randomly.

Pair Corralation between Northstar Clean and Rocky Mountain

Assuming the 90 days trading horizon Northstar Clean Technologies is expected to generate 0.94 times more return on investment than Rocky Mountain. However, Northstar Clean Technologies is 1.06 times less risky than Rocky Mountain. It trades about 0.14 of its potential returns per unit of risk. Rocky Mountain Liquor is currently generating about -0.02 per unit of risk. If you would invest  20.00  in Northstar Clean Technologies on October 22, 2024 and sell it today you would earn a total of  19.00  from holding Northstar Clean Technologies or generate 95.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.19%
Values	Daily Returns

Northstar Clean Technologies  vs.  Rocky Mountain Liquor

Northstar Clean Tech

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Northstar Clean Technologies are ranked lower than 17 (%) 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.

Rocky Mountain Liquor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rocky Mountain Liquor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Northstar Clean and Rocky Mountain

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

The idea behind Northstar Clean Technologies and Rocky Mountain Liquor 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.