Correlation Between Alderan Resources and Northern Star
Can any of the company-specific risk be diversified away by investing in both Alderan 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 Alderan 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 Alderan Resources and Northern Star Resources, you can compare the effects of market volatilities on Alderan 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 Alderan Resources with a short position of Northern Star. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alderan Resources and Northern Star.
Diversification Opportunities for Alderan Resources and Northern Star
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Alderan and Northern is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Alderan 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 Alderan 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 Alderan 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 Alderan Resources i.e., Alderan Resources and Northern Star go up and down completely randomly.
Pair Corralation between Alderan Resources and Northern Star
Assuming the 90 days trading horizon Alderan Resources is expected to generate 4.94 times more return on investment than Northern Star. However, Alderan Resources is 4.94 times more volatile than Northern Star Resources. It trades about 0.03 of its potential returns per unit of risk. Northern Star Resources is currently generating about 0.06 per unit of risk. If you would invest 6.22 in Alderan Resources on September 13, 2024 and sell it today you would lose (3.62) from holding Alderan Resources or give up 58.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alderan Resources vs. Northern Star Resources
Performance |
| Timeline |
| Alderan Resources |
| Northern Star Resources |
Alderan Resources and Northern Star Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alderan Resources and Northern Star
The main advantage of trading using opposite Alderan Resources and Northern Star positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alderan 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.| Alderan Resources vs. Northern Star Resources | Alderan Resources vs. Evolution Mining | Alderan Resources vs. Bluescope Steel | Alderan Resources vs. Sandfire Resources NL |
| Northern Star vs. Hutchison Telecommunications | Northern Star vs. Bell Financial Group | Northern Star vs. G8 Education | Northern Star vs. Bank of Queensland |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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