Correlation Between CVW CleanTech and Northstar Clean

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

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

Diversification Opportunities for CVW CleanTech and Northstar Clean

-0.03

Correlation Coefficient

CVW CleanTech  Northstar Clean

Good diversification

The 3 months correlation between CVW and Northstar is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding CVW CleanTech and Northstar Clean Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northstar Clean Tech and CVW CleanTech 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 CVW CleanTech are associated (or correlated) with Northstar Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northstar Clean Tech has no effect on the direction of CVW CleanTech i.e., CVW CleanTech and Northstar Clean go up and down completely randomly.

Pair Corralation between CVW CleanTech and Northstar Clean

Assuming the 90 days horizon CVW CleanTech is expected to generate 7.23 times less return on investment than Northstar Clean. But when comparing it to its historical volatility, CVW CleanTech is 1.38 times less risky than Northstar Clean. It trades about 0.01 of its potential returns per unit of risk. Northstar Clean Technologies is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  26.00  in Northstar Clean Technologies on September 3, 2024 and sell it today you would earn a total of  5.00  from holding Northstar Clean Technologies or generate 19.23% return on investment over 90 days.

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

CVW CleanTech  vs.  Northstar Clean Technologies

CVW CleanTech

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CVW CleanTech are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, CVW CleanTech may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Northstar Clean Tech

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Northstar Clean Technologies are ranked lower than 16 (%) 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.

Pair Trading with CVW CleanTech and Northstar Clean

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

The idea behind CVW CleanTech and Northstar Clean Technologies 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.