Correlation Between Dupont De and Northland Power

Can any of the company-specific risk be diversified away by investing in both Dupont De and Northland Power 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 Dupont De and Northland Power into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dupont De Nemours and Northland Power, you can compare the effects of market volatilities on Dupont De and Northland Power 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 Dupont De with a short position of Northland Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dupont De and Northland Power.

Diversification Opportunities for Dupont De and Northland Power

0.53

Correlation Coefficient

Dupont De  Northland Power

Very weak diversification

The 3 months correlation between Dupont and Northland is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and Northland Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northland Power and Dupont De 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 Dupont De Nemours are associated (or correlated) with Northland Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northland Power has no effect on the direction of Dupont De i.e., Dupont De and Northland Power go up and down completely randomly.

Pair Corralation between Dupont De and Northland Power

Allowing for the 90-day total investment horizon Dupont De Nemours is expected to generate 0.76 times more return on investment than Northland Power. However, Dupont De Nemours is 1.31 times less risky than Northland Power. It trades about 0.03 of its potential returns per unit of risk. Northland Power is currently generating about 0.02 per unit of risk. If you would invest  8,212  in Dupont De Nemours on August 31, 2024 and sell it today you would earn a total of  178.00  from holding Dupont De Nemours or generate 2.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Dupont De Nemours  vs.  Northland Power

Dupont De Nemours

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dupont De Nemours are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Dupont De is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Northland Power

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Northland Power are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Northland Power is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Dupont De and Northland Power

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

The idea behind Dupont De Nemours and Northland Power 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.