Correlation Between Keyera Corp and Northland Power

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Can any of the company-specific risk be diversified away by investing in both Keyera Corp and Northland Power 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 Keyera Corp and Northland Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Keyera Corp and Northland Power, you can compare the effects of market volatilities on Keyera Corp and Northland Power 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 Keyera Corp with a short position of Northland Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Keyera Corp and Northland Power.

Diversification Opportunities for Keyera Corp and Northland Power

0.43
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Keyera and Northland is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Keyera Corp and Northland Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northland Power and Keyera Corp 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 Keyera Corp are associated (or correlated) with Northland Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northland Power has no effect on the direction of Keyera Corp i.e., Keyera Corp and Northland Power go up and down completely randomly.

Pair Corralation between Keyera Corp and Northland Power

Assuming the 90 days trading horizon Keyera Corp is expected to generate 3.88 times less return on investment than Northland Power. In addition to that, Keyera Corp is 1.1 times more volatile than Northland Power. It trades about 0.07 of its total potential returns per unit of risk. Northland Power is currently generating about 0.31 per unit of volatility. If you would invest  1,829  in Northland Power on April 22, 2025 and sell it today you would earn a total of  475.00  from holding Northland Power or generate 25.97% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy98.44%
ValuesDaily Returns

Keyera Corp  vs.  Northland Power

 Performance 
       Timeline  
Keyera Corp 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Keyera Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Keyera Corp is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.
Northland Power 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Northland Power are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, Northland Power displayed solid returns over the last few months and may actually be approaching a breakup point.

Keyera Corp and Northland Power Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Keyera Corp and Northland Power

The main advantage of trading using opposite Keyera Corp and Northland Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Keyera Corp position performs unexpectedly, Northland Power 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 Northland Power will offset losses from the drop in Northland Power's long position.
The idea behind Keyera Corp and Northland Power 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.

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