Correlation Between Chilwa Minerals and Northern Star
Can any of the company-specific risk be diversified away by investing in both Chilwa Minerals 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 Chilwa Minerals and Northern Star into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chilwa Minerals Limited and Northern Star Resources, you can compare the effects of market volatilities on Chilwa Minerals 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 Chilwa Minerals with a short position of Northern Star. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chilwa Minerals and Northern Star.
Diversification Opportunities for Chilwa Minerals and Northern Star
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chilwa and Northern is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Chilwa Minerals Limited 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 Chilwa Minerals 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 Chilwa Minerals Limited 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 Chilwa Minerals i.e., Chilwa Minerals and Northern Star go up and down completely randomly.
Pair Corralation between Chilwa Minerals and Northern Star
Assuming the 90 days trading horizon Chilwa Minerals Limited is expected to generate 1.05 times more return on investment than Northern Star. However, Chilwa Minerals is 1.05 times more volatile than Northern Star Resources. It trades about -0.02 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 90.00 in Chilwa Minerals Limited on September 5, 2024 and sell it today you would lose (2.00) from holding Chilwa Minerals Limited or give up 2.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chilwa Minerals Limited vs. Northern Star Resources
Performance |
| Timeline |
| Chilwa Minerals |
| Northern Star Resources |
Chilwa Minerals and Northern Star Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chilwa Minerals and Northern Star
The main advantage of trading using opposite Chilwa Minerals and Northern Star positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chilwa Minerals 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.| Chilwa Minerals vs. Northern Star Resources | Chilwa Minerals vs. Evolution Mining | Chilwa Minerals vs. Bluescope Steel | Chilwa Minerals vs. Sandfire Resources NL |
| Northern Star vs. Westpac Banking | Northern Star vs. Bell Financial Group | Northern Star vs. Prime Financial Group | Northern Star vs. IDP Education |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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