Correlation Between Northern Technologies and PPG Industries

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

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

Diversification Opportunities for Northern Technologies and PPG Industries

-0.48

Correlation Coefficient

Northern Technologies  PPG Industries

Very good diversification

The 3 months correlation between Northern and PPG is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Northern Technologies and PPG Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PPG Industries and Northern Technologies 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 Northern Technologies are associated (or correlated) with PPG Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PPG Industries has no effect on the direction of Northern Technologies i.e., Northern Technologies and PPG Industries go up and down completely randomly.

Pair Corralation between Northern Technologies and PPG Industries

Given the investment horizon of 90 days Northern Technologies is expected to generate 1.93 times more return on investment than PPG Industries. However, Northern Technologies is 1.93 times more volatile than PPG Industries. It trades about 0.02 of its potential returns per unit of risk. PPG Industries is currently generating about 0.0 per unit of risk. If you would invest  1,259  in Northern Technologies on August 27, 2024 and sell it today you would earn a total of  140.00  from holding Northern Technologies or generate 11.12% return on investment over 90 days.

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

Northern Technologies  vs.  PPG Industries

Northern Technologies

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Technologies are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak forward indicators, Northern Technologies may actually be approaching a critical reversion point that can send shares even higher in December 2024.

PPG Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PPG Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PPG Industries is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Northern Technologies and PPG Industries

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

The idea behind Northern Technologies and PPG Industries 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.