Correlation Between HP and Northern Minerals
Can any of the company-specific risk be diversified away by investing in both HP and Northern Minerals 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 HP and Northern Minerals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HP Inc and Northern Minerals Exploration, you can compare the effects of market volatilities on HP and Northern Minerals 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 HP with a short position of Northern Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and Northern Minerals.
Diversification Opportunities for HP and Northern Minerals
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between HP and Northern is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Northern Minerals Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Minerals and HP 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 HP Inc are associated (or correlated) with Northern Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Minerals has no effect on the direction of HP i.e., HP and Northern Minerals go up and down completely randomly.
Pair Corralation between HP and Northern Minerals
Considering the 90-day investment horizon HP is expected to generate 17.87 times less return on investment than Northern Minerals. But when comparing it to its historical volatility, HP Inc is 20.33 times less risky than Northern Minerals. It trades about 0.14 of its potential returns per unit of risk. Northern Minerals Exploration is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 19.00 in Northern Minerals Exploration on August 28, 2024 and sell it today you would lose (1.00) from holding Northern Minerals Exploration or give up 5.26% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
HP Inc vs. Northern Minerals Exploration
Performance |
| Timeline |
| HP Inc |
| Northern Minerals |
HP and Northern Minerals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HP and Northern Minerals
The main advantage of trading using opposite HP and Northern Minerals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP position performs unexpectedly, Northern Minerals 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 Minerals will offset losses from the drop in Northern Minerals' long position.The idea behind HP Inc and Northern Minerals Exploration pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Northern Minerals vs. American Copper Development | Northern Minerals vs. Triple Flag Precious | Northern Minerals vs. Hecla Mining | Northern Minerals vs. Compania de Minas |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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