Correlation Between Northstar Clean and Yum Brands

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

Diversification Opportunities for Northstar Clean and Yum Brands

-0.27

Correlation Coefficient

Northstar Clean  Yum Brands

Very good diversification

The 3 months correlation between Northstar and Yum is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Northstar Clean Technologies and Yum Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yum Brands 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 Yum Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yum Brands has no effect on the direction of Northstar Clean i.e., Northstar Clean and Yum Brands go up and down completely randomly.

Pair Corralation between Northstar Clean and Yum Brands

Assuming the 90 days horizon Northstar Clean Technologies is expected to generate 3.57 times more return on investment than Yum Brands. However, Northstar Clean is 3.57 times more volatile than Yum Brands. It trades about 0.16 of its potential returns per unit of risk. Yum Brands is currently generating about 0.01 per unit of risk. If you would invest  14.00  in Northstar Clean Technologies on October 22, 2024 and sell it today you would earn a total of  13.00  from holding Northstar Clean Technologies or generate 92.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.2%
Values	Daily Returns

Northstar Clean Technologies  vs.  Yum Brands

Northstar Clean Tech

Risk-Adjusted Performance

18 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Northstar Clean Technologies are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Northstar Clean reported solid returns over the last few months and may actually be approaching a breakup point.

Yum Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yum Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Yum Brands is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Northstar Clean and Yum Brands

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

The idea behind Northstar Clean Technologies and Yum Brands 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.