Correlation Between Australian Unity and Northern Star
Can any of the company-specific risk be diversified away by investing in both Australian Unity 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 Australian Unity and Northern Star into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian Unity Office and Northern Star Resources, you can compare the effects of market volatilities on Australian Unity 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 Australian Unity with a short position of Northern Star. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Unity and Northern Star.
Diversification Opportunities for Australian Unity and Northern Star
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Australian and Northern is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Australian Unity Office 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 Australian Unity 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 Australian Unity Office 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 Australian Unity i.e., Australian Unity and Northern Star go up and down completely randomly.
Pair Corralation between Australian Unity and Northern Star
Assuming the 90 days trading horizon Australian Unity Office is expected to under-perform the Northern Star. But the stock apears to be less risky and, when comparing its historical volatility, Australian Unity Office is 1.22 times less risky than Northern Star. The stock trades about -0.06 of its potential returns per unit of risk. The Northern Star Resources is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,373 in Northern Star Resources on August 28, 2024 and sell it today you would earn a total of 388.00 from holding Northern Star Resources or generate 28.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Australian Unity Office vs. Northern Star Resources
Performance |
| Timeline |
| Australian Unity Office |
| Northern Star Resources |
Australian Unity and Northern Star Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Unity and Northern Star
The main advantage of trading using opposite Australian Unity and Northern Star positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Unity 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.| Australian Unity vs. Clime Investment Management | Australian Unity vs. ACDC Metals | Australian Unity vs. Group 6 Metals | Australian Unity vs. Neurotech International |
| 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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