Correlation Between Norstar and Electra Co

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

By analyzing existing cross correlation between Norstar and Electra Co Pr, you can compare the effects of market volatilities on Norstar and Electra Co 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 Norstar with a short position of Electra Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norstar and Electra Co.

Diversification Opportunities for Norstar and Electra Co

0.86

Correlation Coefficient

Norstar  Electra Co

Very poor diversification

The 3 months correlation between Norstar and Electra is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Norstar and Electra Co Pr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electra Co Pr and Norstar 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 Norstar are associated (or correlated) with Electra Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electra Co Pr has no effect on the direction of Norstar i.e., Norstar and Electra Co go up and down completely randomly.

Pair Corralation between Norstar and Electra Co

Assuming the 90 days trading horizon Norstar is expected to generate 1.37 times less return on investment than Electra Co. In addition to that, Norstar is 1.04 times more volatile than Electra Co Pr. It trades about 0.22 of its total potential returns per unit of risk. Electra Co Pr is currently generating about 0.31 per unit of volatility. If you would invest  706,300  in Electra Co Pr on September 25, 2024 and sell it today you would earn a total of  341,700  from holding Electra Co Pr or generate 48.38% return on investment over 90 days.

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

Norstar  vs.  Electra Co Pr

Norstar

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Norstar are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Norstar sustained solid returns over the last few months and may actually be approaching a breakup point.

Electra Co Pr

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Electra Co Pr are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Electra Co sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Norstar and Electra Co

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

The idea behind Norstar and Electra Co Pr 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.