Correlation Between Northstar Clean and Transocean

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

Diversification Opportunities for Northstar Clean and Transocean

0.4

Correlation Coefficient

Northstar Clean  Transocean

Very weak diversification

The 3 months correlation between Northstar and Transocean is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Northstar Clean Technologies and Transocean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transocean 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 Transocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transocean has no effect on the direction of Northstar Clean i.e., Northstar Clean and Transocean go up and down completely randomly.

Pair Corralation between Northstar Clean and Transocean

Assuming the 90 days horizon Northstar Clean Technologies is expected to generate 1.11 times more return on investment than Transocean. However, Northstar Clean is 1.11 times more volatile than Transocean. It trades about 0.04 of its potential returns per unit of risk. Transocean is currently generating about -0.02 per unit of risk. If you would invest  24.00  in Northstar Clean Technologies on December 22, 2024 and sell it today you would earn a total of  1.00  from holding Northstar Clean Technologies or generate 4.17% return on investment over 90 days.

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

Northstar Clean Technologies  vs.  Transocean

Northstar Clean Tech

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Northstar Clean Technologies are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Northstar Clean may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Transocean

Risk-Adjusted Performance

Very Weak

Over the last 90 days Transocean has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Transocean is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Northstar Clean and Transocean

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

The idea behind Northstar Clean Technologies and Transocean 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.