Correlation Between Northern Oil and RadNet

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

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

Diversification Opportunities for Northern Oil and RadNet

0.87

Correlation Coefficient

Northern Oil  RadNet

Very poor diversification

The 3 months correlation between Northern and RadNet is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Northern Oil Gas and RadNet Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RadNet Inc and Northern Oil 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 Oil Gas are associated (or correlated) with RadNet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RadNet Inc has no effect on the direction of Northern Oil i.e., Northern Oil and RadNet go up and down completely randomly.

Pair Corralation between Northern Oil and RadNet

Considering the 90-day investment horizon Northern Oil is expected to generate 4.57 times less return on investment than RadNet. But when comparing it to its historical volatility, Northern Oil Gas is 1.55 times less risky than RadNet. It trades about 0.07 of its potential returns per unit of risk. RadNet Inc is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  2,542  in RadNet Inc on January 25, 2024 and sell it today you would earn a total of  2,325  from holding RadNet Inc or generate 91.46% return on investment over 90 days.

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

Northern Oil Gas  vs.  RadNet Inc

Northern Oil Gas

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Oil Gas are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Northern Oil reported solid returns over the last few months and may actually be approaching a breakup point.

RadNet Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RadNet Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, RadNet unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Northern Oil and RadNet

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

The idea behind Northern Oil Gas and RadNet Inc 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.