Correlation Between Northern Star and IAMGold
Can any of the company-specific risk be diversified away by investing in both Northern Star and IAMGold 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 Northern Star and IAMGold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Star Resources and IAMGold, you can compare the effects of market volatilities on Northern Star and IAMGold 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 Northern Star with a short position of IAMGold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Star and IAMGold.
Diversification Opportunities for Northern Star and IAMGold
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Northern and IAMGold is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Northern Star Resources and IAMGold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IAMGold and Northern Star 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 Northern Star Resources are associated (or correlated) with IAMGold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IAMGold has no effect on the direction of Northern Star i.e., Northern Star and IAMGold go up and down completely randomly.
Pair Corralation between Northern Star and IAMGold
Assuming the 90 days horizon Northern Star is expected to generate 1.69 times less return on investment than IAMGold. But when comparing it to its historical volatility, Northern Star Resources is 1.13 times less risky than IAMGold. It trades about 0.05 of its potential returns per unit of risk. IAMGold is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 197.00 in IAMGold on September 2, 2024 and sell it today you would earn a total of 353.00 from holding IAMGold or generate 179.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 91.94% |
| Values | Daily Returns |
Northern Star Resources vs. IAMGold
Performance |
| Timeline |
| Northern Star Resources |
| IAMGold |
Northern Star and IAMGold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Star and IAMGold
The main advantage of trading using opposite Northern Star and IAMGold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Star position performs unexpectedly, IAMGold 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 IAMGold will offset losses from the drop in IAMGold's long position.| Northern Star vs. Aurion Resources | Northern Star vs. Rio2 Limited | Northern Star vs. Palamina Corp | Northern Star vs. Grande Portage Resources |
| IAMGold vs. Eldorado Gold Corp | IAMGold vs. Coeur Mining | IAMGold vs. Gold Resource | IAMGold vs. Alamos Gold |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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