Correlation Between Agnico Eagle and Northern Star

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

Diversification Opportunities for Agnico Eagle and Northern Star

AgnicoNorthernDiversified AwayAgnicoNorthernDiversified Away100%
0.55
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Agnico and Northern is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Agnico Eagle Mines 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 Agnico Eagle 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 Agnico Eagle Mines 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 Agnico Eagle i.e., Agnico Eagle and Northern Star go up and down completely randomly.

Pair Corralation between Agnico Eagle and Northern Star

Considering the 90-day investment horizon Agnico Eagle Mines is expected to generate 0.52 times more return on investment than Northern Star. However, Agnico Eagle Mines is 1.94 times less risky than Northern Star. It trades about 0.3 of its potential returns per unit of risk. Northern Star Resources is currently generating about 0.14 per unit of risk. If you would invest  7,884  in Agnico Eagle Mines on November 23, 2024 and sell it today you would earn a total of  1,921  from holding Agnico Eagle Mines or generate 24.37% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy97.44%
ValuesDaily Returns

Agnico Eagle Mines  vs.  Northern Star Resources

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -100102030
JavaScript chart by amCharts 3.21.15AEM NESRF
       Timeline  
Agnico Eagle Mines 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Agnico Eagle Mines are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Agnico Eagle displayed solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb80859095100
Northern Star Resources 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Over the last 90 days Northern Star Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Northern Star is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb99.51010.51111.5

Agnico Eagle and Northern Star Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-6.24-4.67-3.1-1.540.02871.693.415.146.86 0.020.040.060.08
JavaScript chart by amCharts 3.21.15AEM NESRF
       Returns  

Pair Trading with Agnico Eagle and Northern Star

The main advantage of trading using opposite Agnico Eagle and Northern Star positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Agnico Eagle 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.
The idea behind Agnico Eagle Mines and Northern Star Resources 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.

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