Correlation Between Norstar and Queenco L

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

By analyzing existing cross correlation between Norstar and Queenco L, you can compare the effects of market volatilities on Norstar and Queenco L 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 Queenco L. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norstar and Queenco L.

Diversification Opportunities for Norstar and Queenco L

0.6

Correlation Coefficient

Norstar  Queenco L

Poor diversification

The 3 months correlation between Norstar and Queenco is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Norstar and Queenco L in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Queenco L 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 Queenco L. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Queenco L has no effect on the direction of Norstar i.e., Norstar and Queenco L go up and down completely randomly.

Pair Corralation between Norstar and Queenco L

Assuming the 90 days trading horizon Norstar is expected to under-perform the Queenco L. But the stock apears to be less risky and, when comparing its historical volatility, Norstar is 3.02 times less risky than Queenco L. The stock trades about -0.03 of its potential returns per unit of risk. The Queenco L is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest  43,460  in Queenco L on September 28, 2024 and sell it today you would earn a total of  31,030  from holding Queenco L or generate 71.4% return on investment over 90 days.

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

Norstar  vs.  Queenco L

Norstar

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Norstar are ranked lower than 10 (%) 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.

Queenco L

Risk-Adjusted Performance

24 of 100

Solid

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

Pair Trading with Norstar and Queenco L

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

The idea behind Norstar and Queenco L 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.