Correlation Between Alto Metals and Northern Star
Can any of the company-specific risk be diversified away by investing in both Alto Metals 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 Alto Metals and Northern Star into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alto Metals and Northern Star Resources, you can compare the effects of market volatilities on Alto Metals 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 Alto Metals with a short position of Northern Star. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alto Metals and Northern Star.
Diversification Opportunities for Alto Metals and Northern Star
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Alto and Northern is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Alto Metals 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 Alto Metals 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 Alto Metals 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 Alto Metals i.e., Alto Metals and Northern Star go up and down completely randomly.
Pair Corralation between Alto Metals and Northern Star
Assuming the 90 days trading horizon Alto Metals is expected to generate 1.5 times more return on investment than Northern Star. However, Alto Metals is 1.5 times more volatile than Northern Star Resources. It trades about 0.27 of its potential returns per unit of risk. Northern Star Resources is currently generating about 0.07 per unit of risk. If you would invest 6.30 in Alto Metals on August 28, 2024 and sell it today you would earn a total of 2.80 from holding Alto Metals or generate 44.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alto Metals vs. Northern Star Resources
Performance |
| Timeline |
| Alto Metals |
| Northern Star Resources |
Alto Metals and Northern Star Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alto Metals and Northern Star
The main advantage of trading using opposite Alto Metals and Northern Star positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alto Metals 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.| Alto Metals vs. Healthco Healthcare and | Alto Metals vs. Aurelia Metals | Alto Metals vs. Oneview Healthcare PLC | Alto Metals vs. TPG Telecom |
| Northern Star vs. Australian Unity Office | Northern Star vs. Centuria Industrial Reit | Northern Star vs. Green Technology Metals | Northern Star vs. Computershare |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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