Correlation Between Q2 Holdings and Northstar Clean

Can any of the company-specific risk be diversified away by investing in both Q2 Holdings 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 Q2 Holdings and Northstar Clean into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Q2 Holdings and Northstar Clean Technologies, you can compare the effects of market volatilities on Q2 Holdings 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 Q2 Holdings with a short position of Northstar Clean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Q2 Holdings and Northstar Clean.

Diversification Opportunities for Q2 Holdings and Northstar Clean

0.91

Correlation Coefficient

Q2 Holdings  Northstar Clean

Almost no diversification

The 3 months correlation between QTWO and Northstar is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Q2 Holdings 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 Q2 Holdings 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 Q2 Holdings 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 Q2 Holdings i.e., Q2 Holdings and Northstar Clean go up and down completely randomly.

Pair Corralation between Q2 Holdings and Northstar Clean

Given the investment horizon of 90 days Q2 Holdings is expected to generate 0.65 times more return on investment than Northstar Clean. However, Q2 Holdings is 1.53 times less risky than Northstar Clean. It trades about 0.23 of its potential returns per unit of risk. Northstar Clean Technologies is currently generating about 0.15 per unit of risk. If you would invest  7,461  in Q2 Holdings on September 16, 2024 and sell it today you would earn a total of  3,049  from holding Q2 Holdings or generate 40.87% return on investment over 90 days.

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

Q2 Holdings  vs.  Northstar Clean Technologies

Q2 Holdings

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Q2 Holdings are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Q2 Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

Northstar Clean Tech

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Northstar Clean Technologies are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Northstar Clean reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Q2 Holdings and Northstar Clean

The main advantage of trading using opposite Q2 Holdings and Northstar Clean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Q2 Holdings 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 Q2 Holdings 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.