Correlation Between Aruma Resources and Northern Star
Can any of the company-specific risk be diversified away by investing in both Aruma Resources and Northern Star 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 Aruma Resources and Northern Star into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aruma Resources and Northern Star Resources, you can compare the effects of market volatilities on Aruma Resources and Northern Star 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 Aruma Resources with a short position of Northern Star. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aruma Resources and Northern Star.
Diversification Opportunities for Aruma Resources and Northern Star
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Aruma and Northern is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Aruma Resources and Northern Star Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Star Resources and Aruma Resources 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 Aruma Resources are associated (or correlated) with Northern Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Star Resources has no effect on the direction of Aruma Resources i.e., Aruma Resources and Northern Star go up and down completely randomly.
Pair Corralation between Aruma Resources and Northern Star
Assuming the 90 days trading horizon Aruma Resources is expected to under-perform the Northern Star. In addition to that, Aruma Resources is 2.54 times more volatile than Northern Star Resources. It trades about -0.11 of its total potential returns per unit of risk. Northern Star Resources is currently generating about 0.0 per unit of volatility. If you would invest 1,700 in Northern Star Resources on September 12, 2024 and sell it today you would lose (7.00) from holding Northern Star Resources or give up 0.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aruma Resources vs. Northern Star Resources
Performance |
| Timeline |
| Aruma Resources |
| Northern Star Resources |
Aruma Resources and Northern Star Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aruma Resources and Northern Star
The main advantage of trading using opposite Aruma Resources and Northern Star positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aruma Resources position performs unexpectedly, Northern Star 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 Northern Star will offset losses from the drop in Northern Star's long position.| Aruma Resources vs. BKI Investment | Aruma Resources vs. Environmental Clean Technologies | Aruma Resources vs. Carnegie Clean Energy | Aruma Resources vs. Hotel Property Investments |
| Northern Star vs. Pinnacle Investment Management | Northern Star vs. Diversified United Investment | Northern Star vs. Data3 | Northern Star vs. Stelar Metals |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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