Correlation Between Northstar Clean and Pembina Pipeline

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

Diversification Opportunities for Northstar Clean and Pembina Pipeline

-0.2

Correlation Coefficient

Northstar Clean  Pembina Pipeline

Good diversification

The 3 months correlation between Northstar and Pembina is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Northstar Clean Technologies and Pembina Pipeline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pembina Pipeline 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 Pembina Pipeline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pembina Pipeline has no effect on the direction of Northstar Clean i.e., Northstar Clean and Pembina Pipeline go up and down completely randomly.

Pair Corralation between Northstar Clean and Pembina Pipeline

Assuming the 90 days horizon Northstar Clean Technologies is expected to generate 19.61 times more return on investment than Pembina Pipeline. However, Northstar Clean is 19.61 times more volatile than Pembina Pipeline. It trades about 0.02 of its potential returns per unit of risk. Pembina Pipeline is currently generating about 0.08 per unit of risk. If you would invest  26.00  in Northstar Clean Technologies on December 24, 2024 and sell it today you would earn a total of  0.00  from holding Northstar Clean Technologies or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Northstar Clean Technologies  vs.  Pembina Pipeline

Northstar Clean Tech

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Northstar Clean Technologies are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Northstar Clean is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pembina Pipeline

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pembina Pipeline are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Pembina Pipeline is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Northstar Clean and Pembina Pipeline

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

The idea behind Northstar Clean Technologies and Pembina Pipeline 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.