Correlation Between American West and Northern Star
Can any of the company-specific risk be diversified away by investing in both American West 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 American West and Northern Star into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American West Metals and Northern Star Resources, you can compare the effects of market volatilities on American West 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 American West with a short position of Northern Star. Check out your portfolio center. Please also check ongoing floating volatility patterns of American West and Northern Star.
Diversification Opportunities for American West and Northern Star
-0.79 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between American and Northern is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding American West 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 American West 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 American West 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 American West i.e., American West and Northern Star go up and down completely randomly.
Pair Corralation between American West and Northern Star
Assuming the 90 days trading horizon American West Metals is expected to under-perform the Northern Star. In addition to that, American West is 2.44 times more volatile than Northern Star Resources. It trades about -0.19 of its total potential returns per unit of risk. Northern Star Resources is currently generating about 0.13 per unit of volatility. If you would invest 1,475 in Northern Star Resources on August 29, 2024 and sell it today you would earn a total of 243.00 from holding Northern Star Resources or generate 16.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American West Metals vs. Northern Star Resources
Performance |
| Timeline |
| American West Metals |
| Northern Star Resources |
American West and Northern Star Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American West and Northern Star
The main advantage of trading using opposite American West and Northern Star positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American West 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.| American West vs. Northern Star Resources | American West vs. Evolution Mining | American West vs. Bluescope Steel | American West vs. Sandfire Resources NL |
| Northern Star vs. Hutchison Telecommunications | Northern Star vs. National Storage REIT | Northern Star vs. ACDC Metals | Northern Star vs. MotorCycle Holdings |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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