Correlation Between Northstar Clean and TC Energy

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

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

Diversification Opportunities for Northstar Clean and TC Energy

0.77

Correlation Coefficient

Northstar Clean  TC Energy

Poor diversification

The 3 months correlation between Northstar and TRP-PA is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Northstar Clean Technologies and TC Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TC Energy Corp and Northstar Clean 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 Northstar Clean Technologies are associated (or correlated) with TC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TC Energy Corp has no effect on the direction of Northstar Clean i.e., Northstar Clean and TC Energy go up and down completely randomly.

Pair Corralation between Northstar Clean and TC Energy

Assuming the 90 days trading horizon Northstar Clean Technologies is expected to generate 4.54 times more return on investment than TC Energy. However, Northstar Clean is 4.54 times more volatile than TC Energy Corp. It trades about 0.12 of its potential returns per unit of risk. TC Energy Corp is currently generating about 0.08 per unit of risk. If you would invest  23.00  in Northstar Clean Technologies on September 29, 2024 and sell it today you would earn a total of  16.00  from holding Northstar Clean Technologies or generate 69.57% return on investment over 90 days.

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

Northstar Clean Technologies  vs.  TC Energy Corp

Northstar Clean Tech

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Northstar Clean Technologies are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Northstar Clean showed solid returns over the last few months and may actually be approaching a breakup point.

TC Energy Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TC Energy Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, TC Energy is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Northstar Clean and TC Energy

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

The idea behind Northstar Clean Technologies and TC Energy Corp 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.